The technical rebound of the nation’s equity market last week was as a result of low valuation of stocks that attracted new positioning, ahead of the earnings season with prices and earnings likely to support dividend payment. This is despite the expected cut in dividend, due to the weak economy that negatively impacted the corporate profit of many companies in recent years. The bull trying to resurface in a prolonged bear market without improved economic and market fundamentals were referred to as fluke, since there is no new thing, policy or action to reverse the trend now except for the earnings season which equally needs more additional impetus to make positive impact on share prices when it starts hitting the market. The bull rally momentum in a down market was reduced last week as short-term players took profit from the few days of uptrend. The bear market is likely to continue as long as the price of oil, Nigeria's major source of revenue, continues to nose-dive on daily basis, while at the same time impacting negatively on the nation's external reserve and currency.

The mixed performance of the domestic and international markets last week is a reflection of economic situation in different countries that are pointing to recession. This therefore calls for urgent action by different governments to rescue their economies, thereby rekindling confidence in them. Europe market had up and down movement as equities reacted to the European Central Bank’s dovish statement, whereas China's latest GDP report has sent signal of weak economic outlook for the globe in 2016. Many investors and experts are analyzing its immediate and future impact on the global market.

Back home, the Composite NSE All Share Index closed the week at 23,826.50 from an opening figure of 23,514.04, representing a 1.33 per cent growth, a difference of 312.46 points. In the same vain, market capitalisation gained N100 billion in a three-day rally to close the week under review at N8.19 trillion from opening figure of N8.09 trillion, representing a 1.24 per cent gain. The number of advancers out-paced decliners marginally for the first time in 2016 with the ratio of 33 to 32 on an increasing volume showing that investors are gradually positioning for dividend in the market.

The mixed trend in the market has not given a clear direction of investors'behaviourtowards the market and economy as the index was down for two trading sessions and up for the other trading sessions to close in the green. 

NSE WEEKLY CHART MOVEMENT INDICATING DOWN TREND

The market seem to have reversed but still on the bearish channel as momentum is weak currently waiting for strong market forces to sustain the trend.  The oversold region of the index is supporting reversal as RSI is at 28.76 value. Traders should wait for the outcome of the MPC meeting before taking short term position while investors should increase their stake in good companies that are selling at a discount due to the market situation and have potential of rewarding investors in 2016 with dividend. 

The trades to watch are stocks with high upside potential to create value for traders and investors in terms of capital growth and dividend payout.

TRADES TO WATCH

UCAP

LIVESTOCKS FEEDS

AFRICA PRUDENTIAL

ZENITH BANK

DANGOTE CEMENT

Outlook for the week

The market is likely to experience the same mixed performance as traders will be taking profit and new entrance will also wait to know the outcome of the MPC meeting when it ends on Tuesday. Fund managers in the first month of the year will be balancing portfolio to reposition for the earnings season. The RSI readings is still in the oversold and MACD is pointing to more downside. Traders should watch out for key economic indicators and factors that will support or improve market fundamental before thinking short.