MARKET UPDATE FOR MAY 9, 2017

NSE SET TO BREAKOUT DEC HIGH, AS MARKET CAPCLOSES ABOVE YEAR OPEN

It was a very interesting trading session on the Nigerian Stock Exchange (NSE) Tuesday, as the market opened on a bullish in the early hours, which was sustain till the last minute to record a big leap enough to take the market indicators close to its December 2016 high on the strength of juicy gains by Dangote Cement and Nigerian Breweries that helped to sustain the eight-day of bullish run in a row.  

The continued Naira appreciation ahead of the 2017 budget approval by the National Assemblyis expected to kick start the government’s economic plan and accelerate economic recovery with right reforms and wholehearted implementation.  

The stock market as a leading indicator of the welbeing of the economy is actually pointing investors to where the economy and the market are heading and whether the economic fundamentals would continue to look up and in the process boost the performance of companies. If so, investors would be attracted to the stock market again and this recovery trend in the market sustained, at least in the medium term.

Meanwhile, the NSE’s composite All-Share index gained 337.88 basis points to close Tuesday’s trading session at 26,756.21 points, from an opening figure of 26,418.33 points, representing a 1.28% growth on a huge volume traded, which was higher when compared to previous day’s volume. Similarly, market capitalisation for the day went up by N116.8bn close at N9.25tr from an opening value of N9.13tr, representing also a1.28% value gained.

The gain was enhanced by value appreciation in the shares of Dangote Cement, NB, Oando, Zenith Bank, GTBank, Okomu Oil, Access Bank and FBNH, all of which further impacted the All Share index to reduce year- to-date negative position to 0.44%, while market capitalisation turned positive by N2.12bn, representing 0.02% gain YTD, above the year’s opening value.

Market breadth for the day remained positive and strong, but widened as the number of advancers outweighed decliners in the ratio of 36:8 to continue eight straight days of bull-run on a high volume of trade that signals that the end of the rally is near.

Market transactions in volume and value were mixed as the volume went up by 101.49% to 539.28mshares from previous day’s 267.64mshares, while value dropped by 13.50% to N2.82bn from previous day’s N3.26bn. 

Trades in the shares of FCMB, ZENITH BANK, UBA, DIAMOND BANK and FBNH topped the activity chart as most traded equities by volume

The NSE All-Share index and all sectoral indices close in the green, except the NSE Industrial Goods that closed 0.30% in the red at the end of the day’s trading.

At the end of the day, Oando topped the advancers’ table, with its share price rising by10.14% to close at N8.69 on the activities of market forces; followed by Fidson Healthcare with 9.5% to close at N1.84 each on the back of the interplay of market forces and acquisition move by the company.

On the flipside, Linkage Assurance led the decliners’ table, losing 3.78% to close at N0.52 purely on market forces; followed by Dangote Sugar, which dropped 3.53% to close at N6.46 on profit taking. 

As market opens this morning, expect mixed performance as profit booking is underway. That means investors should not panic if they take position based on strong numbers and future prospects of any stock.

Again, we advise that investors allow numbers to guide their decisions to reposition for the rest of the year’s trading especially now that first quarter earnings reports are out to give insight of what should be expected at year-end.

Industry potential is very important when picking a stock, because there are factors that are sector-specific and would naturally impact positively or negatively on companies operating within such an industry.

Technically, the market uptrend continued yesterday on a high volume that supported positive market breadth on high stock prices. Market sentiments remain positive on improving company fundamentals as revealed by recent numbers emanating from the listed companies, especially Q1 earnings reports and positive economic data that continue to drive high demand for stocks. 

Nonetheless, the NSE’s trending ability and direction is strong as ADX is above 20, while MFI is looking up to indicate money is entering the market as at close of trading.

MACD is still bullish, while RSI is reading 70.12 which in at the overbought region to close the day’s trade. The candlestick formation pattern at the upper band of Bollinger signals imminent reversal of the market trend, as traders start cashing out.  Be careful when taking position at this point unless in value stocks with medium and long term perspective.