market slides into oversold region 070612 - proshare

7/31/2019 Market Slides Into Oversold Region 070612 - Proshare

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Market slides into oversold region, ripens for another round of rally.

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Market slides into oversold region, ripens for another round of rallyThursday, June 07, 2012 / Proshare Reserach

NOTE:The purpose of this report is not to celebrate the N494.73billion loss the market

recorded in the last 23 trading days - but to put you, the investor, journalistand analyst - on standby mode as the market appears ripe technically foranother round of rally as its oversold posture is likely to incite active bargain(s)in the market - soon as the midweek sentiment analysis reveals.

Recently, the Nigerian Capital Market peaked at 22,665.99 on May 4th 2012 with aYTD of 9.34% gain before the profit-taking sessions began - which apparently hasover-stretched given that the market has plunged below the mythical 22,000

psychological line in recent times (specifically on June 1st 2012), recordingconsecutive four weekly losses due to unrelenting sell pressures and an increase inmarket price volatility on the back of such profiteering.

The outlook recorded is in line with our position as we had observed in our sentimentanalysis report dated May 4th 2012 (Sentiment Analysis Report W/E May 04,

2012) - The position of the All Share Index (ASI) at its top i.e. overboughtregion as revealed by RSI would suggest a possible short term marketcorrection - with the market direction being influenced by profit taking anytime

soon. This points to further market price volatility as sectors are now equallysplit between the bulls and bears.

In addition, our analysis of market sentiments and activities on the bourse revealed that

the Nigerian market slipped into a reversal mode recently, which data suggests mayextend further as the lack of positive news has given it a support; and may continue tostoke the consistent pessimistic and speculative trading postures by investors/traders.Sentiment Analysis Report: W/E 010612 Market Slips into Reversal Mode weconfirmed the reversal mode based on indicators as reveled by our analysis.

It is evident from the data interpretation that the market RSI which measures market

momentum, is currently trading below the oversold line at 26%, falling from its top of

84.22% - a figure recorded on May 4th 2012. This posture revealed that the market hasslipped into an oversold region and remained depressed, due to the suppressed posturessuggesting a possible bargain drive.


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Buttressing this further, the market moving averages suggest that the market is bearishin both the short and mid-long term period as the key benchmark indices of 21,114.68closed below its short and mid-long term moving average of 21,739.69 and 21,239.69.

Technically, the oversold posture of the market is usually a bargain signal for smartinvestors as this reveals cheap postures of most active and liquid stocks on the bourse.

This is where most of the bottomed-out stocks are likely to experience impressivepatronage as we had already noticed recently in the Healthcare sector while mostsmall and medium cap stocks continued to triumph amid an increased sell tendency

while the big caps still recorded a sell pressure.

A cursory look at market trend so far in the year r2012 reveals an impressive and bullishperformance between the periods ofearly April to early May 2012 while the market

peaked at 22.665.99 on May 4th 2012, trading above a 13-months high before thestrong reversal trend hits - a normal market phenomenal barring all unforeseencircumstances/events.

The Rally

Market

Indicators 30-Mar-12 04-May-12 Variance

ASI 20,652.47 22,665.99 9.75%

Market CAP 6,549,842,134,195.90 7,228,449,054,391.91 N678.60billion gain

The Reversal

MarketIndicators 04-May-12 07-Jun-12 Variance

ASI 22,665.99 21,114.68 -6.84%

Market CAP 7,228,449,054,391.91 6,733,719,016,445.70 N494.73billion Loss

Proshare Research

During the period, market appreciated by 9.75% in 22sessions, representingN678.60billion increase in market net value- a significant performance against weak YTDperformance of 9.34% and Q1'2012 performance of -0.38%.


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However, the market has lost above N400billion to the reversal trend in the last 23sessions as sustained sell pressure towards blue chips in medium and big capitalisationcategory continued to depress market performance into the oversold region.

The year-to-date market performance plunged from 9.29% gain recorded on May 8th2011 to close weaker at 1.85% at the end of todays session while the key benchmark

indices may hit below 21,000 psychological line if the big caps continue to fall as wehave observed recently.

Conclusively, we maintain our position towards coming periods as stated in our recentsentiment analysis - Sentiment Analysis Report: W/E 010612 Market Slips into

Reversal Mode

Be that as it may, we envisage that another round of bargain trend is not in doubt as weremain bullish towards the market - while the oversold postures of the overall market

and some value stocks on the bourse may appear as a good buy signal for intelligentinvestors.

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market slides into oversold region 070612 - proshare

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