What to Expect in the Nigeria Equity Market Post MPC Announcement -by Adeshina Adetunji

Technical Analysis: Prediction of Post MPC Outcome

Looking at the post market reaction and trend after the last four MPC outcome using the chart would better aid in how we relate with the equity market (for fixed income pardon me for not doing such).

A view at the NSE ASI daily chart below, the vertical sky blue line represents the exact date of each MPC announcements (20/09/2016, 22/11/2016, 24/01/2017 and 21/03/2017) while the yellow line represent the SMA 100 (trend determination line)

From the chart, we would see that 4 - 5 on average trading days after the announcements, the market tends to stay in a range and thereafter move in the direction of the prevailing trend.

Post September 2016 and January 2017 had the market move in the prevailing trend with exception of November 2016 which had an upside rally after the few days range but the momentum was not sustained to have a reversal in trend as the general trend still trades below the SMA 100.

For March 2017 post MPC market reaction, we observed a full range with the SMA 100 closing in with the index price action and forming an higher low (an indication of a reversal or change in trend). Therefore, the post MPC in this period did not conform with the previous 3 announcements and we had a long range trading for about a month.

Going forward:

What do we expect after the May 2017 MPC outcome?

1.       The current trend is up (index trading above SMA 100)

2.       We expect a range an average of 3-5 trading days range (history repeats itself)

3.       A positive outlook for the equity market in the short and medium term while the long term bias has change to neutral

4.       Smart positioning in liquid and volatile equities with great fundamentals and technical data to work with.

 by Adeshina Adetunji