Trading on the floor of the Nigerian Stock Exchange closed positively to usher in the new month of May as the three straight days of bull transition in bear market continued on the strength of price appreciation of highly capitalized stocks especially as investors react positively to Q1 earnings report of Nestle Nigeria Plc to further push the Composite index into green. Investors should be very careful to jump into position now as profit takers and traders exiting the market are selling on a seemingly strong market, if any position at all should be for the long term perspective in case there is a reversal. The possibility of pull back is imminent as investor confidence and economic fundamentals are still shaking as oil price has reverse downward again. The Composite index NSEASI gained 803.09 points to close at 25,865.50 from an opening figure of 25,062.41 representing 3.20 percent improvement on capital gain of NESTLE, DANGCEM and NB. In similar direction, market capitalization gained 3.2 percent to close at N8.99 trillion from opening value of N8.72 trillion. Leading index NSEASI year to date returns is currently at negative 9.69 percent while the market capitalization for the same period had lost N933.35 billion.
The market breadth was in favor of the bulls as the number of advancers outpaced the decliners in the ratio of 33 to 12 on a marginal decrease in volume and value. The volume of trades stood at 220 million shares in contrast to 229 million shares representing 4 percent decline while value recorded N1.50 billion as against N1.50 billion, representing 0.03 percent drop from their previous trading levels. Transactions in the shares of ACCESS, FCMB, FBNH, ZENITH and FIDELITY topped the activity chart as most traded equities as measured by volume. NSEASI and all sector indices closed in the green except for NSEOILGAS which shed 3.56 percent while NSEASEM remains unchanged.
NSEASI DAILY TIME FRAME
Technically, the market is strong as blue chip stocks that had suffered price decline responded to the strong sentiment of the market as Nigeria securities were retained on the international market index MSCI after proposing to delist Nigeria from the frontier index at the end of last month. Lead Indicator approaching March resistance line is good, any breakout at this point will confirm strong recovery and bull ascendancy. But, the probability of the market pulling back is high.
NSEASI closed above the upper band by 16.2%. Although index have broken the upper band and an upside breakout is possible, the most likely scenario is for the current trading range that NSEASI is in to continue. Making the picture somewhat unclear is the fact that Bollinger Bands are 44.73% narrower than normal. The narrow width of the bands suggests low volatility as compared to NSEASI’s normal range. Therefore, the probability of volatility increasing with a sharp price move has increased for the near-term. The bands have been in this narrow range for 4 period(s). The probability of a significant price move increases the longer the bands remain in this narrow range.
Currently the MACD is bullish since it is trading above its signal line. The MACD crossed above its signal line 2 period(s) ago. Since the MACD crossed its moving average, NSEASI’s price has increased 3.61%, and has ranged from a high of 25,930.86 to a low of 24,806.05. RSI is currently reading 68.80 while other technical indicators like Stochastic Oscillator and CCI are reading overbought, signaling sell.
Traders and Investors should watch their earlier positions to know if target set are met so that they can exit position in profit while new positioning should wait and watch today outcome of the market.