Nigerian Equity Trade Idea 9/07/2017

STOCK PICKS FOR THE WEEK

Zenith bank Plc

Trend history:

The upside rally in the equity saws a trend from 2017 low of N14.80k (17/03/2017) to a high of N23 (16/06/2017), this is the second impulse wave to the upside after the stock signaled an end in the downtrend in April 2016 (higher low was formed, this signaled the end of the bearish trend).

First impulse wave was from N8.83k to N18.05k then a corrective wave began driving price down to N13.44k which is 50% Fibonacci retracement level of the impulse wave.

The price then picked from the 50% Fibonacci retracement level where renewed bargaining interest was since; price strongly rallied from N13.01k low to N23 high which marks the completion of the second wave. The N23 high was within the 127.2% - 161.8% Fibonacci extension level.

 

Chart 1 – Weekly Timeframe

After the rally to N23, profit taking resulted into a pullback to test a resistance now turned support at N19.54 (a confluence of 61.8% Fibonacci retracement level of the uptrend N13.01K – N23). Volume in the week was higher in the bid side with a reversal candle formation to the bull side.

 

Char 2 – Daily timeframe

On the daily timeframe, price currently trends above the SMA 100 and 200 (medium and long term trend indicator). As long as price trends above these moving averages we are still in the bullish trend.

Momentum indicators RSI 14 day period and stochastic indicators currently signals weakness in the downtrend and potential upside resumption. 

Sentiment analysis:

Remain bullish with bargaining interest set to resume upward.

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Mansard Plc

The bullish rally seen in the company’s share price from 2017 low of N1.45k got to a high of N2.70k marginally breaching a key resistance level of N2.60K while RSI 14 day period got to the overbought level.

Profit taking has thus pushed price to retrace to trade at 61.8% Fibonacci retracement level at N2.21k

 

Chart 1 – Weekly Timeframe

Going forward:

For two consecutive weeks, the share value appreciated signaling a refusal to go below N2.21k with a Doji candle formation in the previous week now confirmed by the full bullish candle at the end of last week’s trading session.

Sentiment analysis:

Remain bullish with bargaining interest set to resume upward.

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Transcorp Plc

The steep recovery in the share market price of Transcorp saw the equity reach 2017 high of N2 in the month of June 2017.

Investors began taking their gains from there on which saw the price of the equity decline to a low of N1.25k testing 50% Fibonacci retracement level (N1.32K) and eventually closed above the level with a Doji weekly candle formation. 

RSI 14 week period retraced from the overbought zone to now trade at 61 while volume remain moderate.

 

Chart 1 – Weekly Timeframe

For two consecutive weeks, the share price candle formation has formed a Doji candle meaning indecision from the two sides of the market, a confirmation candle is required to determine either resumption in the uptrend has started or the correction continues. 

Char 2 – Daily timeframe

On the daily timeframe, we see two days of price pickup signaling a possible end of the corrective trend with momentum indicators RSI 14 day period and Stochastic indicators signaling a possible renewed bargaining interest in the stock by the investing community. 

Sentiment analysis:

Remain bullish with bargaining interest set to resume upward.

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Oando Plc

A speculative stock from analysts’ perspective, Oando has thus offered good returns to speculators in the market. The share price has returned a 153% appreciation from low of N4.15K (18/11/2017) to high of N10.50K (12/05/2017). 

The share price rally from N4.15K saw a breach of technical resistance level of N8.11K to reach a high of N10.5K. Profit taking level was projected at 127.2% Fibonacci extension level at N9.35K.

The price action has thus respected this level with price finding resistance to close above N9.35K for three weeks (12^th, 19^th and 26^th June, 2017) thereafter resulted to a corrective movement bringing the price to 50% Fibonacci retracement level at N7.01K (upside wave of N4.15K – N10.50K)

Chart 1 – Weekly Timeframe

In the week ended 30^th June, 2017 price formed a bullish Doji candle (a signal showing the end of the correction and a possible resumption of the uptrend). The week ended 07/07/2017 confirmed the previous week’s candle formation with a bullish candle (increased bargaining interest).

 

Char 2 – Daily timeframe

On the daily timeframe, after breaching the pennant price pattern the stock finds support at N7.04K which tested the lower Bollinger band and MACD weakening.

Sentiment analysis:

A bullish resumption is expected but a confirmation is required above the close of N8.11K.

An aggressive investor would can accumulated with risk limited at N7 while a conservative investor would wait for a close above intermediate resistance of N8.11K

 

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