Profit Taking, Sustained Volatility, Amidst Year-end Bargain Hunting, Portfolio Rebalancing

Market Update for December 20
Trading on the Nigerian Stock Exchange remained very volatile on Thursday, reversing previous day’s negative position, while swinging between north and south to reflect market sentiments and investor perception of the economy and its managers.

The market resisted further decline month to date as its strong support level stood at 30,500 on the strength of relative improvements in economic activities since the beginning of this last quarter of the year.

Portfolio repositioning however continues , while investors keep their gaze on the political environment as things become clearer and decisions being made based on the campaign styles of major parties and their flag bearers. Nigerians are also digesting and assessing the various economic blueprints the presidential candidates, given that the economy is the wheel that drives progress, development and wealth creation.

The NSE All share index opened slightly green in the morning, but experienced a sharp pull-back at the mid-morning to midday, before retracing up in the afternoon on the back of strong buying in blue chip stocks to close the day higher. This was despite the wave four corrective extensions rising from intraday low of 30,506.79bps, to a high of 30,802.90bps which was the final close of the session on a high traded volume.

Market technicals for Thursday were positive and mixed as traded volume was higher than previous day’s in the midst of negative breadth and strong buying pressure as revealed by Investdata’s Daily Sentiment Report, showing a buy volume of 100% and 0% sell position. Volume index for the day total transactions was 2.14.
The momentum behind the day’s market performance was down, despite the positive sentiment as reflected in the money flow index at 35.61bps, from previous day’s 46.50bps, indicating that funds left the market and some stocks.

Index and Market Cap
The benchmark Index gained 97.92bps, closing at 30,802.90bps at the end of Thursday trading, rising from 30,704.98bps, representing 0.32% growth, just as market capitalization climbed by N32.77bn to N11.25tr, after opening at N11.22tr, representing a 0.32% value appreciation.

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The day’s upturn was driven by gain recorded from stocks like: Seplat Petroleum, Dangote Cement, Guaranty Trust Bank, Diamond Bank, Conoil and Dangote Sugar among others, which reduce Year-to-Date loss to 19.46%. It also brought YTD decline in market capitalization to N2.36tr, from its opening level in January, representing 17.37% decline during the period.

Mixed Sectors Indices
The sectoral indices were largely bullish except for the NSE Banking and consumer goods index, while market breadth turned negative with number of decliners outpacing advancers in the ratio of 22:17.

Market activities were mixed as volume was up 170.19% to 547.98m shares, up from the previous day’s 201.1m units, while value notched marginally by 0.22% to N4.09bn, as against midweek’s N4.10bn. Transaction volume was driven by stocks in the financial services, healthcare and industrial goods sectors like: Union Diagnostic, Access Bank, Zenith Bank, Lafarge and Guaranty Trust Bank.

The best performing stocks were NEM Insurance and Unity Bank, as they topped the advancers table, gaining 10% each to close at N2.53 and N0.88 each on market forces and low price attraction. Decliners for the day were led by Union Diagnostic and Union Bank, following their 7.69% and 6.67% slide, closing at N0.24 and N5.60 each, on market forces and profit taking.

Market Outlook
Being last full trading day of the week and before the Christmas holidays for many investors and traders, expect profit taking and sustained volatility amidst bargain hunting and portfolio repositioning for year-end to shape performance of the market.

MACD on weekly and daily time frame is crossing over on high volume, which supports uptrend, depending on market forces, even as the market is still resisting further decline. This is especially as the number of companies hitting new 52-week low has dropped.

The ongoing volatility will persist as Q3 numbers assist investors and fund managers rebalance their portfolios, while watching the political space and ahead of full year company earnings position and post-election market dynamics. These are likely to drive prices north, or south, while determining market direction before or after the Presidential Election.

Investors should review their positions in line with their investment goals, strength of the company numbers and act as events unfold in the global and domestic environment.

However, we would like to reiterate our advice that investors should go for equities with intrinsic value,
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of weak company, economic and market fundamentals.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
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Tel: 08028164085, 08032055467
https://investdata.com.ng/2018/12/profit-taking-sustained-volatility-amidst-year-end-bargain-hunting/