Goodbye, 2020 – What a year you’ve been!
As I write this last outlook post of the year, I find myself reflecting on the past 12 months of 2020. My heart hurts for all the pain and loss experienced around the world but I’m also filled with gratitude (that we made it) and hope (for what 2021 may bring).
While a new year allows us to hit the “reset” button, turning the page on our calendar won’t make all of 2020’s baggage magically disappear. It, though, allows us to rediscover hope, shift perspective, and recommit to our goals. Talking about goals…
The Nigerian Stock Market in 2020
Our goal for this post was to do a short review of the Nigerian all-share index in 2020. As usual, we went to the charts to see the big picture when, lo and behold, we saw revelations.
Interesting, right? I am sure that at your first glance, you would notice that:
- The all-share index has maintained a range-bound channel since the 2012 bottom when the index was valued somewhere close to ₦20,000.
- There has been a measure of cyclicality to the action within the range, oscillating in periods of approximately 2-years (24 months) from trough-to-peak and vice-versa since the 2012 bottom.
- An average of 100% price advances and 50% declines from trough to peak occur in this range.
- There was an outlier at the end of the current 24-month cycle, at the end of January 2020 (blue circle on chart), when COVID-19 happened!
The big-picture story here is that the COVID-19 effect caused a glitch in the all-share index’s 24-month cycle. The drastic decline in February and March of 2020 altered the rhythmic flow of the index, where a new uptrend should have commenced in February 2020. A few weeks later, though, the index seemed to have found its footing again and the return to normalcy was underway.
We are, however, experiencing a rally that is accelerating at a faster rate than previous rallies. Recall that each preceding cycle took 24 months to make a 100%. This trend, however, has completed more than 60% of the move in just under half the time.
Stocks to watch
Our top 5 stocks to watch in this week’s episode are:
Please click this link to download a copy of the stock market outlook where you can see the full list of companies in our watchlist for this week.
Stock Market Outlook for the week of December 29, 2020
In an earlier post, we made the observation that the all-share index rallies for approximately 20 weeks after a particular market breadth indicator hits 2.9. This mark was reached on November 18, 2020, and the projected 20-week rally looks like it is on course.
Based on the major channel action of the index, and the pattern discovered which infers a rally into Q1 2021, the odds favor a continuation of the rise in the Nigerian all-share index. With that out of the way, investors need to pay attention to the resistance that sits at ₦39,443.
If the ₦39,443 resistance is blown away, like others before it, it would be reasonable to expect the index to test ₦45,000 soon. In the event that some news breaks and the market sells off, the immediate support level sits at the ₦35,000 mark.
I trust that you will find this useful as you round up your 2020 activities in the stock market. It has been my pleasure writing these posts and, getting your feedback has been rewarding. We are truly hopeful that 2021 will be a more interesting year than 2020 has been – we hope for less drama though.
Till the next post, next year, happy holiday!
