Unprecedented Volume Signals Liquidity: Technical Indicators Uphold Overbought Levels, Bank Stocks Dominate Baskets of Opportunities  

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Mild price growth and in some cases, decline was observed in key stocks last Friday while low cap end of the market continued to gyrate. When these low cap stocks balance out and because stock market graphs are never on a straight line, there is bound to be a slow down as 2017 Q4 earnings are being eagerly awaited to determining clearer direction for the Nigerian bourse.

Comparing quality and quantities of offer and bid sizes; the odd favours a weak opening with equally lower movement for the better part of the week as major equities closed Friday with larger offer than bid sizes. Aside from Access Bank Plc with about 200,000 units closing bid size Friday, all other major equities with closing bid size did so with little quantity that might not be enough to effect major price upward movement.

Unprecedented volume and value of trades however recorded last week suggest high level liquidity. This might prompt an immediate reversal should prices choose to decline.

Technical indicators favour a weak open with possibilities of higher, though mild growth at the end of the week.

With these signals, anything is possible in the market. It suffices however to state that indiscriminate entry and exit makes are marks of indecision and immature investment approach. Be guided by enough information on the stock of your choice and hold to your strategy in the face realities. Earnings seasons are around the corner to separate the boys from the men among stocks.

EQUITIES TO WATCH FOR THE WEEK:

 ACCESS BANK PLC:

Month to Date, Access has returned 20.6% to arrive at N12.60. This growth level is technically mild relative to possibilities hence; Access emerges as one of the stocks where investment could still be made, held on to against 2017 Q4 earnings to be released to the market shortly. With N1.94 2017 Q3 earnings, even if the bank does not improve on this performance, current price will still be considered low not to talk of higher possibilities. Consequently, though Access is not bound to move indiscriminately, the next phase of its gradual movement tends towards N18 and above.

Closing with 200,000 units bid size suggests strong open this week while 5.3% price growth last week makes possibilities this week higher.

FIDELITY BANK PLC:

With about 836,457 unsatisfied bid size to close trading on Friday after a decline of marginal 2.3% at N3.90 price, Fidelity is bound to open strong Monday.

Since indicators are showing overbought situations, fresh investment might come low while liquidity in the market is bound to sustain current price tempo.

The bank’s 2017 Q3 earnings and current price as basis of calculating P/E ratio gives 5.82. This makes possibilities higher more so that its 2017 Q3 was about 100% of the full year performance of 2016. Fresh investment is still doable with between 30-50% returns in view. Existing investors need fear nothing.

GUARANTY TRUST BANK PLC:

Selling at an historical price makes investment in the stock less risky. Pattern of price movement of Guaranty seems a guaranty for future returns without stress. Over the years, Guaranty had earned for itself, the carriage of a defensive stock. It won’t rally indiscriminately when others are pushing up forcefully but even in a bad and shaky market, the stock maintains a calm stance, no wonder it was the first among listed banks on the floor of the Nigerian Stock Exchange to recover fully into the 2008 highest price of N40.76 before surpassing the former height and yet, does not look tired.

Guess what? While virtually all indicators are signifying overbought level in most other stocks, Guaranty enjoys positive signals in money flow index and a few others.

It was a five days of straight gains last week, closing at about 10,000 units excess bid size at a price of N54.71 after a WoW price growth of 11.7%, Monday as usual will open mild while the outlook remains positive. P/E Ratio at N4.44 2017 Q3 earnings is above 12.

NEM:

Indicators are showing overbought level but effective demands are yet not filled hence, the stock closed Friday with 943,981 units on a day its price closed 4% higher at a price of N1.83. Despite the 58.1% 2017 and 2018 YtD price growth of 10.2%, current 5.72 P/E Ratio premised on its 32 kobo 2017 Q3 earnings makes NEM still buyable. Monday stands to open strong.

OKOMU/PRESCO:

Both stocks closed last week with excess bid sizes. While Okomu closed with over 500,000, Presco had 277,000 units. Float of both companies is low. Both stocks are within buyable region. Their P/E ratios are also within buyable range.

SKYE:

Ordinarily, the stock seems a no go area. With no result since 2016, how does one determines the value, more so that the bank is operating under CBN appointed management? Indicators are showing that the stock is overpriced but then, it closed with 968,414 excess bid size Friday after a gain of 9.3% at a price of N1.29. The Bollinger band however states that the stock has closed above the upper band by 1.5%.  This combined with the steep uptrend suggests that the upward trend in prices has a good chance of continuing.  However, a short-term pull-back inside the bands is likely.

UBA:

With P/E Ratio of 7.41 based on N1.74 2017 Q3 earnings and current price of N12.89, UBA price might slow down as volatility reigns at the market arena but definitely not the time for a downturn.

Closing with 50,000 excess bid size is a pointer to profit taking. Opening might be mildly turbulent but going into the week promises to bring stability. Should UBA descend below current level, it offers great buy opportunity.

UNITY BANK PLC:

Closing with an excess bid of 561,560 units Friday, Monday open will be strong all things being equal more so that Bollinger Bands indicator shows that the bank stock has closed above the upper band by 3.2%.  This combined with the steep uptrend suggests that the upward trend in prices has a good chance of continuing.  However, a short-term pull-back inside the bands is likely.

At current price level, the bank’ P/E Ratio based on 2017 Q3 EPS of 21 kobo is still low at 5.81. Meanwhile, Price and moving averages stipulate that the stock price closed above its Short time moving average. Short time moving average is currently above mid-time, AND above long time moving averages.

The relationship between price and moving averages is: bullish in short-term, and bullish in mid-long term.

WEMA BANK PLC:

With 890,170 units of excess bid before the close of the market Friday, Monday seems good for Wema stock. Technically speaking, the stock price has closed above its Short time moving average. Short time moving average is currently above mid-time and above long time moving averages.

The relationship between price and moving averages is: bullish in short-term, and bullish in mid-long term.

ZENITH BANK PLC:

The next stock among banks that is most likely going to hit the 2008 highest price is Zenith. Meanwhile, the all time highest price in history is N53.34. Please note, this will be achieved almost unannounced because of the nature of the stock.

The bank’s 2017 Q3 earnings are of N4.11 is just 2 kobo lower than its full year earnings of 2016. This suggests therefore that Q4 2017 earnings will be bumper and in the process justifies the current price and further pushes the price nearer to its highest ever.

Others stocks to watch in the week include

  • AFPRIPRUD
  • UCAP
  • C AND I LEASING
  • ETERNA
  • TRANSCORP

 

 

 

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