The long bullish run on the NGX is likely to continue, with the index action set to breakout the all-time high of 109,850.83 level and the 200-day moving average again on a strong buying sentiment and momentum that had supported many stocks to hit new 52-week highs in the face of shifting economic fundamentals and better than expected corporate earnings of listed companies.
The V shape chart pattern of the index action indicates inflows of funds in the equity space that had reflected on the buying interest across the low, mid and highly priced stocks to sustain this recovery and uptrend, which has been supported by improving volume, as the market currently trade relatively above its daily average on expanding positive market internals.
Profit taking or pullbacks at this stage of the markup phase of NGX creates opportunity for new entrance and at the same time add more power for the index to trend higher.
Stocks trading and investing are back in business after one month and some weeks setback on profit booking in March and first half of April after mega companies and sectors had announced their audited financials and corporate actions, coupled with the wave of tariffs war emanating from US trade policy that triggered global stock markets selloffs and fear of economic recession that weighed on market players.
The first quarter 2025 financials that started hitting the market at the mid of April changed the seemingly worst investor sentiment and volatility, with impressive numbers from Nigerian Breweries and others triggered position taking in the consumer goods sector and others.
As more corporate scorecards beat expectations ahead of their corporate actions of dividend qualification date and payment.
These fuelled the positive momentum, as players took advantage of earlier pullbacks and stronger Q1 earnings reports to reposition their portfolios in the midst of bargain hunting and sector rotation.
Even as the month of May has brought a wave of uptrend as a way of repeating history of being active on the NGX, after recording 18 times of positive close in the past 27 years and down just 9 time to defy the trade mantra of sell in May and come back in October.
The above reasons were enough to push NGX index decisively up towards its 200-day moving average for the second time in over two months.
The last two times that happened in 2025 bull market (the bull market never technically ended in the index), stocks continued soaring to new all-time highs (see chart below: the red line is the T line, green is 50MA while black line is the 200-day moving average).
Does that mean the same thing will happen this time? Certainly not.
In fact, the first time the NGX index cross the 200-day line during the current bull market in December 24, 2024 the rally continues for two weeks, and the index pulled back below its 200-day line and rebounded briefly to rally for another one month till mid February 2025.
Given that selloffs and volatility in the downtrend lasted for two months till April 16, 2025 before this uptrend that signalled recovery and likely a breakout of all-time high of 109,850.83 bps.
Why the 200-Day Moving Average Matters
Still, the 200-day line is an important technical hurdle, and one that was far from the index action at the beginning of this month.
Getting back above the black line before retracing down in a mirror correction, and the bull market continue; the last two times it happened, stocks continued to rise for an average of one month and three weeks. There is real momentum in the market after Q1 earnings season and mixed macroeconomic indices.
Technical analysis can often be viewed as psychology and sentiment by some investors, but in some cases it can offer up important historical “tells” like this one.
There is a reason the 200-day line has largely acted as a line of distinction during this bull market, as stocks have traded mostly above that threshold; when they have dipped below that line, it is fallen into correction territory.
Conversely, the 200-day moving average acted as a support and resistance since October 2024.
The black line worth paying attention to. The fact that the chart above shows that the NGX’s index has been below the black line for past two month as it is heading for a breakout of line shows the market is still healthy. And now that the market is back to its all time high, you should take it as a green light to deploy some of your excess cash on stocks that have been on your watch list or to expand portfolio positions that you like most.
As you, also allow buying and selling volume to guide your trading decision.
Culled from Independent