TRADERS WATCH 10

The NSEASI chart from the monthly, weekly and daily time-frames shows a reversal in trend to the downside with key resistance levels holding and bringing price down thereafter to test and trade around key support levels.

Recovery which started in the month of February 2016 after the Composite NSEASI hit a low of 22,331 basis point has since seen the index rally to a high of 31,073.30bps where it encountered a resistance. The index subsequently suffered a sharp drop and currently trading at support level of 27,423.50 basis points.

Using a top to bottom trend analysis:

In the monthly timeframe, the ASI continued the downward movement which started in July.

·         Index price action finds support at 27,423.50bps significant technical support level

·         Marginally below the support level while finding support at the resistance (demand) trendline

·         Oscillator indicator hovering in the sell territory below 50 levels, currently at 42 levels (RSI 14day period)

·         Volume analysis momentum shows a relative decline

·         A bearish inside day at last month’s chart formation (an indication of a downward reversal)

NSEASI Monthly Chart 

Weekly chart trend analysis:

In the weekly time-frame, the index clearly shows a ranging trend in the medium term as it trades within the Fibonacci retracement zones (38.2%, 50% and 61.8% value at 30681.66, 29,087.20 and 27,492.74 basis points respectively) of the downtrend (high – 35,843.40bps and low – 22,331bps).

Oscillator indicator as seen in the RSI 14-day period currently trades below the 50-day mark in a bearish zone.

Volume has relatively being average

Index trading on the resistance trendline (a critical technical level)

Weekly chart

Daily chart trend analysis:

On the daily chart below, we see that the index is in search of direction as it currently finds support at the resistancetrendlinewith volume though losing momentum on a daily basis.

Daily chart

Sentiment analysis:

Technically the index is in a corrective phase and at a critical technical level. A breach below the resistance trendline (reference to the daily and weekly chart analysis above) on high volume would mean a full downward resumption with strong sell-off from the investing communities. On the other hand, if the resistance trendline holds, then more accumulation would be seen but the trend would be considered still trading in a range (as long as the index is in the Fibonacci retracement zones) until the key resistance level of 30,681 basis point is breached upward.

Our Expectations:

Our expectation in this new trading week is a range bound market with short term speculative activities being the order of the day. We expect the index to be largely driven by the industrial financial services sectors.

Let us look at sectors that would determine the trend of the market in this trading week.

Sector: Industrial index

Chart analysis of the daily and weekly chart below indicates a possible bottom as both time frames showed a strong upward reversal. The reversal occurred on Friday last week. Key trend analysis are highlighted below:

·         Industrial sector reached resistance level of 2,230.70bps in the trading week 24/06/2016 and then reversed downward to now test weekly intermediate support level at 1,778.92 and daily intermediate support at 1,797.90bps.

·         RSI 14-day period shows the industrial index bounces off the oversold territory of 30 mark and now trades at 35.35 a steep upward move in the last trading day of the week.

NSEASI Weekly Chart 

NSEASI Daily Chart 

Sentiment and expectation analysis:

Technically, the industrial index is expected to rally (recovery expected) in the coming trading sessions largely driven by relatively stronger equities in the sector. Equities such as Dangote Flour, WAPCO and Flour Mills, among others could see upside potentials in the coming trading sessions.

Our sentiment is up in the short-term but down in both the medium and long term.

Would the Oil & Gas sector ‘pickup the call’

Like other sectors on the Nigerian Stock Exchange, the Oil and Gas stocks as seen in the sector’s index has been on a downward rain for six consecutive weeks. The daily chart below has thus pointed to a critical period for the sector as it currently finds support at 289.40bps, a level reached in the trading week of 11/12/2015, while the volume momentum showed a decline in activities (losing momentum).

Oil and Gas Weekly Chart 

Sentiment and expectation analysis:

Technically, the sector could see speculative activities from investors thereby driving corrective move in the index. Equities such as Eterna and Oando, among others, could see upside potentials in the coming trading sessions.

Our sentiment in up is the short term but down in both the medium and long term.