Mixed Performance As Profit Taking May Resurface, Amidst Repositioning Ahead Expected Numbers

Market Update for February 22

Nigeria’s stock market had a very positive Thursday to continue its volatility and followed up previous day’s recovery as more 2017 full year earnings reports are expected to roll in with dividend declaration that will support the seeming retracement in the market. It appears that the bears are gradually losing grip of the market to usher in an uptrend. The NSE index retraced up after touching its 50-Day Moving Average to trade above the 50 and 100-Day moving averages, price support, and trendlines. The rest of the day’s trading session was basking in positive sentiment as reflected in the market breadth, despite the low traded volume that signaled market expectation of these numbers.
During the session also the index hit intraday highs of 42.292.85 from lows of 42,158.32 points and at the same time forming a symmetrical triangle chart pattern that supports continuation or trend reversal. The day ended near the session highs, which is a good close to keep the bull transition.

Oil was among the biggest movers of the day, helped by the U.S. inventory numbers reported yesterday, at a time the market was expecting an inventory build-up, but instead got a large drawdown in supply. This is expected to further boost oil prices and impact Nigeria’s market positively to support the expected full-year numbers. Crude oil oscillated around $50 just a few months ago and today, is above $60. Even so, this bullish wave has not subsided at all, as the Organisation of Petroleum Exporting Countries (OPEC) continues to stick with its deal on production cuts as part of efforts to stabilize price. Over the past 11 months, 142m barrels have been taken out of the U.S. market, representing about 11% of the inventory.

Remember, last year, one of the best research-driven commodities funds on the planet, led by the star commodities investor Leigh Goehring and his long-time research head Adam Rozencwajg. They do some of the most thorough supply/demand work on oil and broader commodities. They have been pounding the table on the fundamental case for $100 per barrel oil. And they think we will see it this year.

They say demand is raging, as supply is faltering while the world has overestimated what the shale industry is capable of producing. In all of this, they believe the market is leaning heavily the wrong way (i.e. “maximum bearishness”). They think we’ve hit the tipping point for prices–where we will see the price of oil accelerate.
Recently, they noted: “We remain firmly convinced that oil-related investments will offer phenomenal investment returns. It’s the buying opportunity of a lifetime.”
However, if we do indeed see oil prices start to accelerate, we will likely see the inflation data accelerate with it.
Back home, Nigeria’s equity market technicals for Thursday were strong but mixed, with high buying pressure of 75% on low volume traded, while selling position stood at 25%. Volume index was 0.40 with money flow index at 23.85 point.

Meanwhile, the composite NSE All-Share index gained 100.46 points to close at 42,158.32 basis points, representing a growth of 0.24% on lower traded volume than the previous day’s. Similarly, market capitalisation for the day went up by N36.05bn to close at N15.17tr, afteropening at N15.13 trillion which also represented 0.24% value gain in investors’ positions.

The upturn was sustained by price appreciation recorded by Total, UBA, Dangote Flour, Flour Mills, Access Bank, UBN, Nestle, Lafarge Africa, Zennth Bank, ETI and FBNH, all of which impacted positively on the NSE’s Year-To-Date returns, as it bounced to 10.50%, just as market capitalisation gain for the period stood at N1.56tr, representing 11.43% YTD growth.

The All Share index and other sectorial indexes closed higher, except for the NSE Consumer Goods that slipped 0.34% lower, while the NSE AseM remained unchanged. Market breadth turned positive as advancers outnumbering decliners in the ratio of 24:17. Market activities in volume and value terms were down by 40.01% and 41.89% to 342.1m shares worth N3.09bn from previous day’s 570.26m units valued at N5.33bn.

Transaction volume for the day was boosted by financial services stocks like Fidelity Bank, Skye Bank, FBNH, FCMB and UBA, which witnessed increased trading to top the activity chart.
At the end of the trading session, Japual Oil and Wapic Insurance topped the advancers table with 5.41% and 4.92% gain to close at N0.39 and N0.64 respectively, on market forces, while Unic Insurance and Courtville Business Solution topped the decliners table after shedding 6.67% and 4.56 % respectively to close at N0.28 and N0.34, on market forces and impact of the new pricing rule.

TODAY’S OUTLOOK
Being the last trading day of the week, expect mixed performance as profit taking may resurface while repositioning ahead of Q4 numbers continue, especially as these early filers Nestle, FO, Africa Prudential and Ucap are expected to hit the market today or early next week. We also expect oil price oscillation and market volatility to continue as traders goes in and out of position, especially with the market pattern changing and prices are relatively low.

The relatively low interest rates in the money market and sell-off in the bond market will boost inflow into stock market as fund managers play earnings season for quick returns target high dividend yield stocks,
However, we would like to reiterate that investors should go for equities with intrinsic value, especially during this season that dividend payment is approaching.
We advise investors to allow numbers guide their decisions while repositioning for the rest of the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.

It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. Market is in phases know the cycles in order to manage your trading and investing risk. For stocks that should be on your shopping list to buy in this seasonality changes as the year winds down, sign up to INVESTDATA BUY AND SELL signal setup by calling 08028164085.

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