NGSE Side Trending Enters Bearish Wave, As Profit-taking Persists

Market Update for Week Ended June 19 and Outlook for June 22—26

Equity prices on the Nigerian Stock Exchange (NSE), last week closed lower on negative sentiments and continued selloffs as market players factored in the expectedly mixed Q2 corporate earnings due to the impact of the novel coronavirus (COVID-19) induced lockdowns and economic downturn that had affected businesses operations over the past months.

This is worsened by investor concerns over the frosty trade relationship between US and China, even as the virus has created huge opportunities for the telecom and ICT companies, just as oil prices continues oscillating at the international markets.

Meanwhile, technical tools are revealing big selloffs in the weeks ahead, as the market and companies’ Price to Earnings Ratios remain relatively high in the short-term and low on the long run, considering the three years of down market.

The recent sideways trending and consolidation of the market over the past three weeks signals a pullback, with Fibonacci retracement index action trigger levels throughout the early part of 2020 creating different opportunities of support and resistance range according to Investdata Research  as revealed by the daily, weekly and monthly charts. It is very likely that the big selloffs bar from last week will also establish a minor support/resistance range within the index and price range of the pullbacks.       

One of the key technical indicators in our analysis and signal setup is Fibonacci retracement tool that acts as a trend following indictor that projects key target and reversal levels, and also highlights key trigger levels as index or price rotates up and down in different time frames.  The benefit we derive from this signal setup is that we can interpret the signal in different forms or ways for our followers and members.

Our research team believes the BLUE RECTANGLE range will act as a minor price support/resistance level after last week’s profit taking. This index range totaling 355.92 points, is likely to prompt volatile price rotation near or outside this range as price attempts to either breakout to the upside or breakdown into a new downtrend.

Movement Of NSEASI

The week under review was bearish as Monday’s trading closed negative with the NSE composite All-Share index losing 0.91% on profit booking, a situation that was sustained on Tuesday when the market closed lost 0.09% on mixed sentiments. Midweek’s session closed 0.17% up; before turning negative again by 0.16% and 0.40% on Thursday and Friday respectively, owing to selloffs.

This brought the week’s cumulative loss to 1.41%, more than enough to wipe out all of previous week’s 0.67% gain, indicating that a price correction is underway.

Specifically, the NSEASI shed 355.92 basis points, after opening at 25,182.67bps, touching an intra-week high of 25,196.62bps from its low of 24,757.68bps on cautious trading and selloffs. With the market entering its distribution phrase, which seriously calls for cautious trading and the need to hold cash because a selloff is underway ahead of the Q2 corporate earnings and absent of positive economic fundamental or information which will trigger positive sentiments at the moment. The selling momentum increased on Friday, even as the market closed below its opening level at 24,826.75ps, compared to previous week’s close, and below the 25,000bps psychological level.

In the same vein, market capitalization lost N192bn, closing at N12.95tr from previous weekend’s N13.14tr, representing a 1.41% value loss in investors’ portfolio, after the share prices of Beta Glass, Berger Paints, Caverton, NPF Microfinance and Skyway Aviation were  adjusted for  dividends of N1.67, 25 kobo, 20 kobo, 20 kobo and 0.0165 kobo respectively.

During the week also, seven companies published their scorecards, comprising two 2019 audited results from Guinea Insurance and Sovereign Trust Insurance; while mixed quarterly earnings were presented to the NSE by the managements of Regency Assurance, Interlinked Technologies, McNicholes, Secure Electronic Technology and Courtville Business Solution.

Decliners were more than advancers in the ratio of 47:14, while energy behind the week’s performance was relatively strong, with Money Flow Index reading 53.18bps, compared to 46.45bps in the previous week, despite the selloffs.

https://investdata.com.ng/ngse-side-trending-enters-bearish-wave-as-profit-taking-persists/