Weekly Technical Equity Outlook - 10th April, 2017

OVERVIEW:
The NSE All-Share Index and Market Capitalization appreciated by 0.92% to close the week at 25,746.52 and N8.909 trillion respectively. 

Similarly, all other Indices finished higher during the week with the exception of the NSE Banking index that depreciated by 0.20% while the ASeM Index closed flat.

Market breath analyses review a positive sentiment as 36 equities gained with 22 stocks declined while 119 equities were unchanged in the trading week as compared to last week’s 36 gains, 24 declines and 117 stocks unchanged respectively, the breath indicators shows positive sentiment.

 

Trend Analysis

Investor’s sentiment was mildly bullish during the past trading week, with relatively low accumulative stands from market players. The Nigerian Stock Exchange All Share Index in the weekly chart below showed that investors remain optimistic on the equities traded on the floor of the exchange.  

Technical levels indicates support at 24,521.80 while intermediate resistance at 26,243bps and key resistant zone at 27,161.20 – 26,874.30 bps

Trend indicator, Bollinger band system on the weekly timeframe showed that the index still trends within the bearish territory and eyeing EMA 20 (mid Bollinger band) at 25.807 bps.

Volume analysis was strongly weak compared to the previous week’s volume with more than 500m volume though it remain on the bid side.  

Daily trend analysis

• Looking at the lower timeframe:   
• The index trading broke above the downward trendline
• Index formed a doji at the upper Bollinger band  
• RSI 14 day period trading at 59
• Volume momentum remain relatively low

 

Overall Sentiment:

Short term: Bullish
Medium term:Bearish
Long term: Bearish

Our Expectations:

Last week’s bullish movement in the ASI index may be regarded as weak as volume did not correspond to the strong rally seen in the index. We can  refer to this as the activities of speculators taking advantage of dividend driven stocks as such we expect a profit taking activities in the coming session as the daily chart reflects a possible impending correction. We expect a correct to occur in blue chip stocks such as Mobil, Nestle, 7Up Bottling Company and some banking stocks giving room for possible accumulation at a relatively lower price. 

Dollar Surged and Yield Rebounded after a Dramatic Week of Negative News, More Upside ahead

Source: ACTIONFOREX.COM

"The market is always right". That's by no means saying that the market is efficient, that's a topic for the academics. But, the market always move with certain underlying forces. We may or may not always understand why stocks, yields, currencies commodities move that way. It doesn't matter. And indeed, the voice of the market is usually the loudest when it does something that doesn't make sense. It's up to us to hear it or ignore it. And, reading news is not about reading the news but the reactions to the news. It's our choice to see the reactions, or just to criticize the reactions.

So coming back to "reality", we've got a very dramatic week, especially towards the end. And news were indeed rather negative to Dollar. US launched military strike in Syria and relationship with Russia tensed up after that. Russia even condemned that US is just "one step away" from war. The highly anticipated summit between US President Donald Trump and Chinese President Xi Jinping ended with "very frank, very candid" discussions. But then? Nothing more. Non-farm payroll grew a mere 98k in March even though unemployment rate dropped to 10 year low.

How did the markets respond? DJIA closed down -0.03% on Friday at -20656.10, and down -7.12 pts only for the week. S&P 500 closed down -0.08% on Friday to 2355.54, down the week by -7.18 pts for the week. 10 year yield dived to as low as 2.271 on Friday but closed the day up 0.030 at 2.373, down -0.023 for the week. Dollar index gained 0.46 on Friday to close at 101.13, up from prior week's 100.56. The resiliences in stocks, rebound in yields and the surge in Dollar were impressive. And these developments argue that, maybe those news were not bad news at all.

One of the explanations could be found in the jump in oil price on geopolitical risks. Energy stocks' rally somewhat offset losses in financial stocks. And technically, WTI crude oil maintained a higher high, higher low pattern and is back above 55 day EMA. It should now be heading back to 55.24 resistance and above to extend the larger up trend. And with that, upside pressure on headline inflation could be revived that would eventually pass through to underlying inflation. ...Read full report

Gold Finds Resistance at $1263 per ounce, Poise for more downtrend

Gold during the Asian session on Friday 7th April, 2017 spiked to the upside as a result of the airstrike by US on Syria. The spike saw the price of the precious metal reached a session high of $1270.66 per ounce.

Gold could not continue in the upside momentum as it ended the trading day at $1253.98 to close below key resistance level of $1263. 

The day ended with an inverted hammer and a negative divergence between price and MACD. 

The precious metal in the coming sessions may be eyeing a key support level at $1240. A break below this level would see a steep downtrend towards $1200 while on the other hand, a movement above $1263 with a daily close would see the metal eye key resistance at  $1306 per ounce.

Strong Recovery in the Nigerian Stock Market - Tales of Barganing Interest

Trend Analysis

The NSEASI chart from the monthly, weekly and daily timeframes shows a reversal in trend to the upside with key resistant levels being breached and price holding above major and intermediate supports on high market participations as shown in volume relatively compared to previous months trading activities by market participants.

Recovery which started in the month of February 2016 after the composite NSEASI hit a low of 22,331 basis point has since seen the index trading above this low forming an higher low subsequently until a breach in the intermediate resistance occurred the week 20/5/2016 at above 26,361 bps (now becoming a support level). 

From top to bottom trend analysis:

As mentioned above, the monthly chart indicates accumulation phases (still to be regarded as a corrective wave) with a higher low on high market activities.

• Index price action find support at the lower Bollinger band trending towards EMA 20 day perio
• Price trends to retest the year’s opening price at 28,707.30 bps
• Oscillator indicator hovering in the sell territory below 50 levels, currently at 40 levels
• Bollinger band indicators shows that market since the opening of trading session in 2015 is in the southern region (trending below Mid-point EMA 20 and lower band)
• Volume analysis shows more bargaining interest from the investing communities as activities soured up about 58% relatively compared to previous month  

 

Weekly chart trend analysis:

Inline with the higher timeframe (monthly chart) the trend has since indicated a corrective wave movement.

In the weekly timeframe, the index clearly shows a breached in resistance zones 26,421.70 – 26,361 bps with a continued higher low.

Oscillators indicator as seen in the RSI 14 day period currently trades above the 50 mark a bullish zone and MACD above the water mark. This gives an early signal of a possible reversal in trend.

Positive divergence between the weekly chart and RSI 14 day period

Volume has relatively being average

 

Daily trend analysis

As with the two higher timeframe trend analysis above (Monthly and weekly chart analysis) the daily charts reflects a upward channel trend movement in the index.

RSI 14 day period correcting after reaching above the 75 mark now back to 59.

Index currently trade in the bullish zone of the Bollinger band trading system (in between higher Bollinger band and EMA 20)

 

Overall Sentiment:

Short term: Bullish
Medium term: Bullish
Long term: Neutral

Our Expectations:

our expectations in the coming months is a strong rally to the upside first to retest and possibly breach the year’s opening price at 28,707.30 bps thereby turning the index into a positive level for the on-going trading year. Evidently resistance 26,361 bps which was breached has thus become a support as profit taking was only able to make the index retest this level and rebound to continue the uptrend. Timely entry is important as we expect minor corrections for better entries.

Recommendations

The stock market currently avail potentials to both value and speculative investors as equities from the banking, industrial goods among.

 

For more analysis, realtime trade calls and Technical analysis education of stocks both for Nigerian Equities Trading and other global markets, mail trendonomicsng@gmail.com or contact 09092133294 to join our mailing list.

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