Q1 Earnings Surprises To Support NSE Short Term Rebound Ahead of 2018 Q1 GDP Report

It was yet another positive trading session on the floor of the Nigerian Stock Exchange on Thursday following the reversal of mid-week's down market on a huge volume traded, amidst continued volatility.

This is even as analysts, traders and investors digest the inflow of Q1 earnings released during the trading session, which many agree beat market expectation, in line with Investdata forecast and expectation.

Trading started out early on a marginal gap up that moved sharply in the mid-morning to intraday highs of 40,937.09 which has become the recent resistance. It pulled back by midday on profit taking, touching a low of 40,724.76 as it continued trading in arrange and at the same time forming a bull wedge & flag that supported continuation of trend. The NSE benchmark index has just cross its 20-day moving average on a strong buying pressure and is moving up gradually in a 3-motive wave. This will, as expected be consolidated on more earnings surprises as seen in Zenith Bank, Africa Prudential and Unilever. 

The current market situation is due to cautionary measures by investors ahead the 2019 general elections. A taste of this was seen in Wednesday's invasion of the hallowed chambers of the Nigerian Senate by thugs who forcefully removed the symbol of authority- the mace. Police have since recovered it and returned same to the Deputy Senate President- Ike Ekweremadu in his office.

Inflow into the equity market has remained unstable, despite the high level of liquidity in the system because some investors already started gradually to hold cash. Some others are playing short to avoid being tapped in the market when investors with smart money start selling.

Nonetheless, the nation's economy and company fundamentals are stronger now, even analysts expect that a lower Monetary Policy Rate (MPR) by the Monetary Policy Committee (MPC) when it meets, hopefully soon. This will further boost the economy. 

Market technicals for the day were positive but mixed as volume traded was huge amidst a strong buying pressure. Market breadth was weak, just as sentiment. Buying position was 70% and selling volume, 30% on a volume index of 1.60 of the day’s total transaction. Money flow index is looking up at 48.02 points, compared to previous day’s 32.31 points, this is an indication that funds are gradually re-entering the market.  

Index and Market Cap

The NSE All Share Index gained 101.82 points to close at 40,874.09 basis points after opening at 40,772.26 bps, representing a 0.25% growth on a huge volume that was higher than previous day’s. Similarly, market capitalisation was up by N36.79bn to close at N14.76tr from an opening value of N14.73tr, also representing 0.25% increase in investors wealth.   

The upturn recorded for the day resulted from price appreciation in stocks like: Dangote Cement, Oando, Lafarge Africa, Access Bank, Union Bank and Dangote Flour. These impacted positively on the NSE’s Year-to-Date returns, lifting it to 6.87%. Market capitalisation gains for the period stood at N1.15tr, representing 8.49% above the year's opening value.

Bearish Sectoral Indices

Performance across sectors were largely  bearish except for the NSE Industrial  that was up due to price rally in Dangote Cement and Lafarge Africa,  while NSE Banking, Insurance, Consumer and Oil/Gas were down as a result of  profit taking in NB,GTBank,11Plc. International Brewery, NEM Insurance   

Market breadth for the day was negative as decliners outnumbered advancers in the ratio of 24:18 to reverse the down market. 

Market activities were up in volume and value by 221.7% and 106.5% respectively to 740.52m shares worth N8.91bn from the previous day’s 230.17m units valued at N4.32bns.
Transaction volume was boosted by financial services and oil stocks like FCMB, Qando, Zenith Bank, GTBank and Access Bank which witnessed increased trading to top the activity chart.

Oando and Courtville were the best performers at the end of the session, topping the advancers' table with 6.1% and 5% respectively to close at N9.60 and N0.21 each.

This was due to market forces and sentiments, amidst expectation of full year 2017 and Q1 2018 earnings reports.   

On the flip side, First Aluminum and Double One P!lc were the worst performing, after losing 7.5% and 4.7% respectively to close at N0.49 and N181 on profit taking.

Market Outlook

We expect the uptrend  to continue, despite being the last trading of the week for profit booking,  on the strength of low stock valuation and amidst the ongoing volatility and portfolio realignments. Add to this the fact of more  Q1 scorecards expected to hit the market soon, ahead of 2018 Q1 GDP figure. Even so, let value investors continue to position for the short  on the strength of company fundamentals.

However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is ongoing and Q1 results are expected in the market arena.
We advise investors to allow numbers guide their decisions while repositioning in any stock, 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. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

Get your home study pack of the INVEST 2018 Traders & Investors Summit and ride with the current recovery on Nigeria’s stock market and economy, thereby ensuring that you invest and trade with knowledge. You can also access stocks analysed in the home study pack of the Chart  Summit held on February 24, 2018, including the 15 stock-picks for 2018 are available now to guide your positioning as trading for the year.

Comprehensive training materials on stock Trading and Investing for Financial Independence series are Available, you can play and watch on your mobile phone, laptop, desktop and TV set. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.

A big thank you to all participants and all that supported to make the Abuja stock market trading workshop a success. We are grateful and believe what you learnt will enhance your knowledge and transform your investing strategies for profitable returns.

Again, we thank you.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467