Mixed Trend, Sentiment Ahead Economic Data, MPC Outcome, 2021 Year-End Positioning
Market Update for the Week Ended November 12 and Outlook for Nov 15-19
The market tends to reward discerning investors with a plan and the patience to wait for the right moment when such come true. There are three important things to consider when preparing for your trading days and the New Year: Have your expectations of what a market could do on the day you want to trade; know your plan in advance when the market follows your expectation, or when it doesn’t; and finally, execute your trading or investing strategy when the market follows your plan, and be flexible and change when your expectation proves wrong.
We envisage a mixed trading pattern due to bargain hunting activities in dividend-paying stocks amid intermittent profit-taking activities. That notwithstanding, we advise investors and traders to position in fundamentally sound stocks with positive technicals and sentiment, since the market’s fundamentals and liquidity continue looking up, with oil price trading above $84 in the international market, while the nation external reserves keep looking up.
Technically, the NGX index’s action on a weekly time frame reveals mixed sentiments, as the ADX remains above 20 points at 33.15, just as the money flow index stood at 77.28 points, revealing the increase in money flow into the equity space. These are indications that confirm volatility, despite the seeming decline in the daily chart due to profit-taking, just as the NGX index has rebounded again to break out the strong resistance level of 42,414 basis points. This signals the possibility of trend continuation on a weekly time frame with the index touching 44,068.70 points before pulling back, following which we have to wait to see what happens in the new week as portfolio repositioning continues on the strength of the Q3 earnings reports.
The above-average trading volume, during the week, is an indication that institutional investors are not selling and the volume that took the market up is still very intact. The light volume on the profit-taking activities shows that retail investors like you and I are the ones selling.
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Movement Of NGXASI
It was a mixed trend for the week under review, as the NGX index action fell in three days, and rose twice, while trading for the week started on a strong upbeat due to positive reactions by investors to the news of the issuance of Approval in principle that would enable telecommunications giants- MTNN and Airtel Payment Service Bank, by the Central Bank of Nigeria (CBN). That announcement pushed Monday’s index up by 2.73%up, which was sustained on Tuesday when the benchmark index chalked an additional 1.11%, following the increased buying interests in tech stocks. There was, however, a pullback by the midweek, Thursday, and Friday, when the composite index shed 0.05%, 0.36%, and 0.68% respectively, bringing the week’s accumulated gain to 2.96%, compared to the previous week’s 0.06% loss. This performance was driven by buy interests in bellwether stocks like MTNN and Airtel Africa.
Consequently, NGX All Share index gained 1,238.51 basis points, closing at 43,253.01bps, after touching an intra-week high of 44,068.70bps from its lows of 41,976.30bps, from the week’s opening figure of 42,014.50bps on mixed sentiments and profit-taking in low and medium cap stocks. Market capitalization during the period rose by N647.01bn, closing at N22.57tr, compared to the previous week’s N21.93tr, which also represented a 2.95% appreciation in value.
The top gainer’s table for the week was dominated by a blend of low, medium, and highly-priced stocks which had become the toast of investors, despite the daily time frame negative vibes and buying sentiments, as a result, positive sentiment for MTNN, Airtel, Unilever, FBN Holdings, Redstar Express, and Neimeth Pharma, in the midst of dividend positioning on the strength of nine-month financials and positive economic data. The week also witnessed the price adjustments of Lafarge Africa and Airtel Africa for interim dividends of N1.00 and N8.29 respectively.
Market breadth was negative during the week amidst the above-average traded volume and mixed sentiment likely to continue as the year winds down. Losers outnumbered gainers in the ratio of 36:27 in the week under review, on a mixed sentiment as revealed by investors’ sentiment report showing a 39% sell volume and 61% buy position. Money Flow Index rose to 77.28bps from the previous week’s 76.58 points, an indication that some funds entered the market.
NSEASI WEEKLY CHART MOVEMENT
On the weekly chart, the NGX index’s action is trading above the 20 and 50-day moving averages to sustain a bull-trend after breaking out a strong resistance level of 42,414.17bps on an above-average traded volume that indicates a continuation of an uptrend. The candlestick pattern at the end of last week was also a bullish candle that revealed the presence of sellers. The index action is set to make or break depending on market sentiment in the new trading week that will support an uptrend or a pullback. However, we need to watch out for the October consumer price index expected to hit the market in the new week. Also with all eyes on fixed income market yields and oil prices that should further support market fundamentals and help attract liquidity to the equity space. This pullback has created new buying opportunities.
Bearish Sectoral Indices
The performance indexes across the sector were in red, except for the NGX Consumer Goods index that closed 0.63% higher, while the NGX Insurance led the decliners after losing 2.25%, followed by Banking, Energy and Industrial Goods with 1.31%, 0.69%, and 0.01% respectively. Activities in volume and value terms were down, as players exchanged 1.47bn shares worth N20.94bn, compared to the previous week’s 1.43bn units valued at N12.37bn. Volume was driven by Financial Services, Conglomerates, and Consumer goods, particularly FBN Holdings, Sterling Bank, UACN, UBA, and Transcorp.
The best-performing stocks for the week were Neimeth Pharm and Redstar Express which gained 12.50% and 12.18% respectively, closing at N0.22 and N0.38 per share respectively on market forces. On the flip side, Conoil and Pharm-Deko lost 14.90% and 9.83% respectively, at N21.70 and N2.11per share, purely profit-taking.
Outlook for the week
We expect a mixed trend and sentiment to continue ahead of economic data and the MPC meeting being the last for the year 2021, as investors and bargain hunters continue to take advantage of price pullback in fundamentally sound stocks for repositioning. It is also noteworthy that fund and portfolio managers continue to take a position on the Q3 numbers ahead of the current fiscal year-end. For now, many stocks remain in their buy range to attract funds into the equity space. Also, investors will continue tracking yields movement in the fixed income market. Also, investors are still observing the interplay of forces in the FX market as the exchange rate in the back market continues to decline. Last week’s above-average volume suggests that institutional investors are not selling. It is noteworthy that oil price continues to oscillate as it trades above $83 in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.
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