June 03, 2010 3265 VIEWS

“Since the European fund managers are heavily in Nigeria, it is an educated guess that some might    have sold to raise cash.”

Has any one noticed that since the beginning of April 2010 – we have had the ASI appreciate on the first two days at the start of the month and the last two days of the month? Yesterday, it happened again – with the market heading south after the first two days uptrend. Co-incidence or what?

Bet you must have wondered if institutional investors are at play here – recall the balancing of the books by institutional investors. This however, is usually done at the end of each quarter.

A cursory look at the trading volume for the days highlighted above does not confirm this thinking.

For example, the combined traded volume for the first two (2) days of March and the last two (2) days of March 2010 were 597 million and 1.28 billion respectively and the combined traded volume for the first two (2) days and the last two (2) days of April 2010 were 916 million and 946 million respectively. To confirm any interference by institutional investors, we would have to see larger single day traded volumes

The market appears to be in a funk.

As highlighted below, the NSE all index is currently trading below its 20 day and 50 day moving averages. The Index dropped below averages on May 21 and May 24, 2010 respectively. Although the market is currently trading above its 200 day CSMA, the short term trend is problematic (Note: The Index below the zero horizontal line indicates the index for both averages)  


The NSE reached a climax (28,029.78) on April 19, 2010 driven by heavy volume. If you track the traded volume for the 5 days prior to 19/4/2010 and that on 19/4/10, total volume traded was 4.7 billion, the highest traded volume for any other period since January 1, 2010. Precisely, the volums for April 4th, 13th, and 19th were 932 million, 996 million, and 967 million respectively. I believe some institutional investors sold into the peak. The trend has been downward since the climax as shown in the graph below:

I don’t think the NSE should be traded in isolation any longer. The indices worldwide have been trending downwards due primarily to the Euro crisis stemming from the problems with Greece (i.e., the FTSE (London) is down 10.1% from its recent peak and the US DOW is down 9.4% from its recent peak). 

The NSE all share index at its recent low (25,573.66) was down 8.8% from its peak, but as of June 02, 2010, it is only down 6.5% from its peak.

Since the European fund managers are heavily in Nigeria, it is an educated guess that some might have sold to raise cash. However, the index appears to be showing some improvement the last 3 days (again, this could be a confirmation of this trend we are seeing in the market), but it is advisable not to expose any funds until the index breaks above 50 day CSMA, and also investors should watch for a pick-up in daily volume, and the index breaking above 28,030 to indicate further uptrend. 

Prepared by the Research Unit based on exchanges between Olufemi Awoyemi, CEO of Proshare and Dr. Chukwumah Biosah, President CEBAL Audit Group, USA and InvestIQ, Technical Analysts to Proshare. All opinions on this page/site constitute our best estimate judgement as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All enquiries should be directed to biosah@aol.com or ceo@proshareng.com 

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