Trend Continuation Still As More Stocks Hit New Highs, Investors Position For Dividends

Market Update for February 22

The benchmark index sustained its positive outing with which it started the week as a result of corporate earnings and dividend declarations, despite the seeming resurfacing of profit taking that slowed down the buying momentum and accumulation positions on the Nigerian Exchange, thereby extending the bull-run for the third consecutive day. There was also sideways movement to trade above the seven-day moving average on very high traded volume and positive market breadth, just as selling sentiment hit some sectors, revealing the mixed performance of the sectorial indexes.

Profit booking in banking and other financial stocks like United Capital, Africa Prudential and others slowed down the buying interest after these stocks gapped up at their opening to pullback at the midday but finally closed above their opening prices for the session, ahead of more earnings releases. There was also the expected impact of rallying oil prices at the international market to as Brent crude traded above $97 per barrel. These are likely to influence the market positively, besides supporting Nigeria’s economic fundamentals.  

We expect market volatility to continue in the midst of this earnings reporting season offering opportunities for the buy and sell side of the market, but it is more important than ever to get good clear concise information to help firm up your trading and investing plans as the market awaits big names to release their corporate earnings and actions as a trigger.

With all this in mind, I personally invite you to join me live today at Investdata Trading Academy with Ambrose every trading day at noon to get the real live position of the market and direction of individual stocks on the exchange. This is necessary to help you make investment decisions at any point. Here, we advise you either as investors or traders to allow their stop-loss and profit targets to guide you while removing every atom of emotion.

Technically, the NGX’s index action, sustained a positive trend, despite profit-taking in blue chips stocks to trade above the 47,000 mark, signaling a change in momentum and trend as index actions and indicators are becoming mixed, looking the same direction in the midst of selling sentiments on a high traded volume. Investors need to watch this, as funds are gradually returning to the market. Trade metrics for the session revealed less accumulation, ahead of fundamental news of dividend and others hitting the market any moment from now, while some stocks like Learn Africa, May & Baker, United Capital, Academy Press, RT Briscoe, and Fidelity Bank, among others hit their new 52-week highs at the close of trading.

At the end of the day, candlestick formation supports a reversal of trend but needs to be confirmed by market forces as the market opens this morning, with the NGX index trading on top of the shortest moving averages and above the 20, 50, and 200. Momentum indicators are looking up, as the ADX reads 62.43. The RSI closed above 50 at 71.66 and Money Flow Index slipped to 66.62 points on a daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds into the equity space, as the direction of fixed income market yields remains unclear with rates not rising as expected.

Tuesday’s trading opened in the green and was sustained, despite the selloffs and buying interests across the sectors which pushed the NGX All-Share index to an intraday high of 47,282.44 basis points, from its lows of 47,233.91bps, before closing above its opening point at 47,246.90 bps.

Market technicals were positive and mixed, as volume traded was slightly higher than in the previous day, amidst breadth favouring bulls on a negative sentiment as revealed by Investdata’s Sentiment Report showing 27% ‘buy’ volume and 73% sell position. The total transaction volume index stood at 1.36 points, just as the energy behind the day’s performance remained relatively strong. Money Flow Index was down marginally at 66.62 points, from the previous day’s 66.70 points, indicating funds left the market.

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Index and Mkt Cap Movement 

The key performance index at the end of Tuesday’s trading, inched up by 12.99 basis points at 47,246.90bps, after opening at 47,243.74bps, representing a 0.03% up, just as market capitalization rose N3bn, closing at N25.50tr, from the opening value of N25.50tr, also representing a 0.05% value gain.

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The day’s upturn was driven by buying interests in Stanbic IBTC, FBNH, Eterna, May & Baker, UCap, Learn Africa, Fidson, Cutix, Berger Paints, and RT Briscoe, among others. This impacted mildly on Year-To-Date gain, which increased to 10.61%. Market capitalization growth stood at N2.79tr YTD, representing a 14.55% rise over the opening level for the year.

Mixed Sector Indices 

Performance indexes across the sectors were mixed, as the NGX Industrial Goods and Energy index closed 0.02% and 0.01% higher respectively, while the NGX Insurance led the decliners, after losing 0.61%, followed by Consumer Goods and Banking with 0.40% and 0.08% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 29:18, while transactions in volume and value terms were mixed, after stockbrokers transacted 421.78m shares worth N5.16bn, compared to the previous day’s 421.36m units valued at N6.52bn. Volume was boosted by trades in United Capital, Transcorp, Zenith Bank, Fidelity Bank, and Access Bank.

Learn Africa and Niger Insurance were the best-performing stocks, after gaining 10% each, closing at N2.42 and N0.22per share on improved earnings and market sentiment. On the flip side, Ellah Lake, and VeritasKap lost 9.88% and 8.00% respectively, closing at N3.83 and N0.23 per share, on selloffs.

Market Outlook

We expect a continuation of trends as traders and investors expect more 2021 audited financials with corporate actions to boost positive vibes during this earnings season as the market interprets the positive economic data released recently, in the midst of profit-taking and portfolio rebalancing. This is will result in market players targeting fundamentally sound and dividend-paying stocks in hope of dividend announcements, as oil trades at $94pb, just as inflation rate moderates at 15.60% and Q4GDP up at 3.98%, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

Meanwhile, market players continue to digest the quarterly and unaudited 2021 full-year results available in the market and what is happenings in fixed income market after the NGX index pulled back slightly to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and the changing patterns in February as the investors look forward to more audited 2021 earnings reports.

The relatively high volume traded in the midst of volatility and recovery moves are creating new buy opportunities on the strength of corporate numbers and economic data. Also, candlestick formation and volume traded during the session shows that institutional players are not buying yet. It is equally noteworthy that during a ranging market many players sit on the fence waiting for a breakout, or down before jumping into any position. Even so, many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08179547605

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