Weighed By Political Risks, Nigerian Bourse Side-Ways Trend, Amidst Cautious Trading

In recent times, volatility is one word that would not go away on Nigeria’s equity market, as it continues side-ways trending, indicating that investors are becoming even more cautious on a daily basis.
Tuesday’s volatility was even on the high side, reversing the previous day’s marginal gain on a high traded volume and 91% selling pressure, closing lower, with the side-ways trending movement related the uncertainty and political risks around the oncoming 2019 general elections, even as we move closer to second half of the year.

The day began with the Nigerian Stock Exchange (NSE) All-Share index opening higher to breakout the symmetrical triangle chart pattern of the market. The index rallied on wave 3 to resistance level of 41,642.33 basis points which was the intraday high between mid-morning and noon, before pulling back to lows of 41,110.44bps on a sell-offs in high cap stocks in the afternoon to make lower-lows. It then retraced up marginally to close at 41,155.80bps, even as it continued to trade above its 20-Day Moving Average for the seventh day on a seeming wave 3 of its daily time frame.

Market technicals for the day were weak and mixed as volume traded was high amidst increasing selling pressure and negative market breadth. The sell-off position was high at 91%, while buying volume was 9% on a volume index of 1.41 of the day’s total transaction. The seeming bull transition was halted on high volume of transactions that reflected in the day’s money flow index which was strengthened further at 70.80 points.
Compared to previous day’s 49.11 points, this is an indication that funds are in the market. The cautious trading and side-ways trending is also irrespective of improvements seen so far in the nation’s economic fundamentals as revealed through the healthier company financials and seeming improvement in the consumer purchasing power.
We also note that side-ways trending movement of the benchmark index is despite the rising oil prices in the international market in recent days due to the aforementioned fear, even as the congresses organized by the ruling All Progressives Congress (APC) across the country failed to provide any comfort, due to the disruptions that trailed it.

However, against the backdrop of the stronger company and economic fundamental and low valuations that have made the stocks attractive, relative to the low interest and yield environments, we see an end soon to the side-ways trending and the stock market making a strong rally on the long run.

Index and Market Cap

The composite NSEASI shed 17.02 basis points to close at 41,155.80 bps after opening at 41,172.82 bps, representing a 0.04% decline on a high volume that was higher than the previous day’s. Similarly, market capitalisation was down by N6.16bn to close at N14.91tr from an opening value of N14.92tr, also representing 0.04% value loss as a result of sell-offs in high cap stocks.

The downturn was driven by profit taking in stocks like: Dangote Cement, Nigerian Breweries Guinness, Forte Oil, Oando and Zenith Bank that impacted negatively on the NSE’s Year-to-Date returns, to rise to 7.6%; while market capitalisation gains for the period stood at N1.30tr, representing 9.54% rise above the year’s opening value.

Bearish Sector Performance

Performance across the sectors were largely bearish except for the NSE Banking and Industrial goods that closed higher due to value gain in Guaranty Trust Bank, ETI and CCNN. Other sectors that closed lower included: NSE Consumer, Insurance and Oil/Gas. This was as result of sell-offs in Nigerian Breweries, Flourmills, Forte Oil, Aiico and Continental Reinsurance.
Market breadth was negative as decliners outweigh advancers in the ratio of 25:24 to halt the two sessions up market.
Market activities were up in volume and value by 156.6% and 124.7% respectively to 563.62m shares worth N5.62bn from previous day’s 221.4m units valued at N2.57bn.

Transaction volume was boosted by financial services stocks like FCMB, Guaranty Trust Bank, Zenith Bank, Sovereign Trust Insurance and Fidelity Bank which witnessed increased trading to top the activity chart.

The best performing stocks for the day were Cutix and Livestock Feed that topped the advancers’ table with gain of 8.5% and 4.9% respectively to close at N3.20 and N0.85 each. This was due to market sentiment and forces
On the flip side, Forte Oil and C/I Leasing that were the worst performing, after losing 5% and 4.8% respectively to close at N40.85 and N1.80 purely on profit taking.

Market Outlook
We expect a mixed performance, volatility and profit taking to continue as investors reshuffle their portfolios along the line of companies with stronger numbers to start the financial year as economic fundamentals are becoming robust on a daily basis, ahead of Q1 GDP and April inflation data. These are likely to confirm the positive impact of monetary stimulus and extraneous factors like upswing in oil price, among other global events now closely under watch.

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.

Ambrose Omordion
CRO| Investdata Consulting Ltd
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