NSE AT 52-WEEK HIGH:TECHNICAL POSITION OF SELECTED STOCKS

As the month of May ended last week, volume of trades was significantly up, reflecting the inflow from other investment windows to the equity market in search of juicier returns, as demand for stocks increased against the backdrop of factors such as the improving economic data, liquidity in the forex market and others like the market being in recovery mode, all of which pushed the Nigerian Stock Exchange (NSE) benchmark All-Share index to its 52-week high.

There was also the last Purchasing Managers Index (PMI), which dropped to 54% from 58% at the end of April, signaling a reduced but yet high productivity level in the real/manufacturing sector, added to the gradual decline in inflation rate, relative stability in the exchange rate and the 0.52% negative growth in the nation’s Q1 2017 GDP to -0.52%, a sign that its economy is gradually going out of recession, among others.

However, the ongoing political drama delaying the signing of the 2017 budget into law, weeks after it was passed by the National Assembly by a government that told Nigerians it is in a hurry to kick-start the nation’s economic recovery with faithful implementation of its recovery and growth agenda(captured in the ERGP), should serve as a sign that investors be not carried away by the turn around, especially in the stock market. The need for caution at this point arises from the fact that the overextended up-trends in the market and the blue chips stocks are Central Bank of Nigeria (CBN) induced confidence that should be backed by complementary fiscal policies.

That notwithstanding, the current sentiment in the market may likely continue until the usual market correction that will force profit taking.But traders should know the position of the stocks relative to its fundamental data before any trade execution at this point that the market is in a serious OVERBOUGHT region because pullback is imminent any moment from now.

UBA

United Bank for Africa had down trended for four years from N10.56 high in June 14, 2013 after the bank cleaned out cob webs in the form of non-performing loans from its books to start afresh, a situation that has been sustained so far, despite different attempts at rebound that failed, before touching the low of N2.77 in February 2016.  There was afterwards a rebound to breakout the orange down trend line in December 2016 when it formed a bullish channel on the strength of its improving profitability and fundamentals that attracted positive sentiment for the bank since the beginning of this year 2017.  Price action has now improved into a rising channel pattern with first support level at N7.40 and second at N6.27 respectively set to offer a low risk trade entry during the next pullback.

ACCESS BANK

Access Bank’s price action was in a falling channel for a period of four years with different attempts at rebound within the channel, from a high of N12.88 eachon February 8, 2013,following the general market direction to a low of N3.60 on April 22, 2016, despite the bank’s strong fundamentals and impressive numbers posted within period. Itrebounded on investing on the back of positive sentiments by the investing community arising from the banks high margin of safety to form a rising channel even as its share price continued to gallop on a bullish general market direction and strong numbers emanating from the bank.

A pullback from the N8.93 will first find support level at N7.20 and second at N6.70 respectively to offer a low risk trade entry during the next pullback. The trending ability and direction for daily and weekly is strong, as ADX is trading above 20 at 30.92 with MFI strongly looking up to indicate that funds are entering the stock. RSI is reading 81.37, which is indicates an extremely overbought region that calls for caution among traders.

ZENITH BANK

Zenith Bank topped out in the last lasting day of 2013, hitting a high of N27 and then dropping to an all-time low of N10.35 on April 15, 2016 with good trending movement as a volatile stock that created money for traders. With its outstanding performance, the bank continued to grow earnings on quarterly and yearly basis, a situation that supported price oscillation that created rooms for accumulation.  It bounced back to N25.45 in June 6, 2014 and N25.48 in April 2015, before finally rebounding on April 22, 2016, with price action forming a rising channel pattern that broke-out of the orange down trend line in May 12, 2017 on a positive market sentiment. This has been helped by the bank’s profitability and investment ratios that remain attractive even at the new 52-week high because of its strong numbers.

FBN HOLDINGS

FBN Holdings posted a four-years high at N17.29 per unit in 2012, before it slumped to N2.97 on September 2, 2016, where it broke out from the down trend to kick-off recovery as buyers interest were mixed due to its high provisioning for non-performing loans. This kept the bank’s share price sideways trending for more than a year before it finally bottomed out at N3.20 in April 2017 to enter an uptrend that is ongoing.  This positive sentiment is driven by new risk strategy and policy of the bank to engage in debt recovery and the relative improvement in oil price at the international markets are expected to boost the bank’s bottom line in Q2 numbers and indeed the 2017 financial year. This is because portion of the debt recovered comes into its books as profit, since provision have been made already.

Price action has formed a cup that supports an uptrend but any pullback at this point will first find support at N5.20,as RSI is reading 86.26, which is at overbought region that calls for caution by new positioning.

GUARANTY TRUST BANK

Guaranty Trust Bank’s price action has formed an inverted head and shoulder pattern that supports continuation of uptrend after touching a five-year high of N37 before pulling back recently to N32.27 and thereafter retraced up to N34 last week, indicating that any retracement at this level will surpass the former high of N37 to breakout the bullish channel.

The uptrend could reach a new high of N40 as Q2 earnings reporting season commences in the coming month, while a pullback to N28 or N30 might offer a low risk buying opportunity.  The stock had steadily rallied from N14.10 in 2012 to a high of N31.31 on June 20, 2014, before pulling back to form a double top on April 2, 2105, at N31.88 per share and down trending to a low of N13.99 in April 2016  and then a rise that since then has been sustained till date, despite pullbacks within the rising channel due to its strong numbers and leadership in cost management in its industry.

DANGOTE CEMENT

Dangote Cement rallied to test an all-time high of N250 in June 27, 2014, from where it entered a steep downtrend that continued into the second quarter of 2017, touching low of N122.90 in February 2016 before retracing back to touch again the upper line of the symmetrical triangle pattern formed by the price action at N203 per share, remaining within the triangle till last week’s breakout that supports a continuation of the trend at N192.93. The possibility of breakout of the resistant level at N203 is high. Investors should wait for a pullback before jumping into take position.

Conclusion

High liquidity recorded in the month of May had propelled many stocks into new price levels, but a handful of low priced equities have emerged with price action in a rising channel pattern that inspires hope of even higher prices going into the second half of 2017. This is however predicated on whether the needful is done by the government and its economic management team to sustain this economic recovery move that is still standing on one leg. 

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