In last week’s outlook, we laid out 3 different scenarios we thought could play out in the Nigerian stock market. We anticipated the index to do one of:
Grind out a narrow range between ₦35,245 and ₦33,582 – Scenario A
Make a 25% correction and decline to ₦32,000 – Scenario B
Resume its rise and break above the ₦36,000 price zone – Scenario C
There was little activity on the index for most of the week until the CBN policy became public. The apex bank announced an upward adjustment of the money market and fixed income rates. This upward adjustment was enough to cause some investors to sell down equities and move to the relative safety of the fixed income markets – causing a decline in the equities market.
All that activity, though, was contained within the range we anticipated in scenario A above, ensuring that not much changed in the market. The market breadth and sector relative strength did not experience any significant changes as well.
Stocks to watch
The list of stocks that we are watching experienced a few changes this week. MANSARD moved up from 15th position to 7th position on the table (Its IH Score improved from 3 to 4). Another change was CUSTODIAN being dropped from the list.
Having disclosed those two changes, our stocks to watch include:
Please click this link to download a copy of this week’s stock market outlook which also includes the full list of companies in our watchlist.
Outlook for the week of December 14, 2020
As stated earlier, the week played out as expected, with the price of the all-share index remaining within the range established over the preceding 3 weeks. Going forward, these are our expectations:
Trading within the range (₦35,245 and ₦33,582) – It was expected that the CBN’s move would push the equities market down. Many, though, do not see the move to be potent enough to cause a severe collapse of the equities market. There is optimism about equities and buyers are still optimistic.
Drop below the range – In the event that the CBN news lingers longer than expected, there is a support level around ₦32,000. We believe the ₦32,000 zone is the ideal correction of the primary move from the bottom made in April.
Some great news filters into the markets – This could trigger a resumption of the bullish trend and we could see the all-share index trade above the ₦36,000 price zone.
With the options given above, I guess we have come to the end of this week’s outlook. We will study the market and return next week with our reviews and updates. Till then, invest responsibly.
Taiwo Megbope is the Co-founder and Chief Growth Officer at Investor Hangout.
He is tasked with ensuring and managing the growth of the Investor Hangout project. His responsibilities include creating and implementing the project's vision as well as executing growth-generating strategies.
Taiwo is an avid researcher and autodidact. In his spare time, he enjoys spending time with his family and friends.