QFAc Pick of the Week – United Bank for Africa Plc

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Monday, January 08, 2018 06:03PM /Quantitative Financial Analytics Ltd 

Though UBA plc price fell from N11.24 to N11 during the last trading day, this week’s Qfac pick is United Bank for Africa, (UBA) Plc and our analysis is pointing to a buy signal. 

United Bank for Africa Plc a financial institution in Nigeria engaged in corporate, commercial and retail banking as well as trade services, cash management, treasury and custodial services with branches African countries. Our buy signal derives from the following: 

Moving Average Analysis: The latest price of N11.00 beats its 5-Day,5 5-Day, 50-Day, and 100-Day moving average prices. Most technical analysts use the moving average rule that recommends a buy when a market close crosses above x day moving average, while a sell is signaled when a market close crosses below x day moving average (where x could be any number of days) 

Proshare Nigeria Pvt. Ltd.
Source: QFAc 

Commodity Channel Index: Though most chartists use the CCI as an overbought/oversold oscillator, it could be used to signal buys or sells. CCI compares current price with average price over a period of time CCI readings of above 100 indicate a buy while those below -100 indicate a sell. Our CCI index for UBA based on a 14- week period is 200.45  

Proshare Nigeria Pvt. Ltd.
Source: QFAc

Relative Strength Index (RSI):
According to Welles Wilder who introduced RSI in1978, market tops are often completed when the RSI rises above 70 while bottoms are formed during periods when the RSI falls below 30. Most analysts prepare to buy as prices dip below 30 using a rise back to 30 as a buy signal and prepare to sell when the RSI moves above 70.This is premised on the notion that RSI of 70 and above indicate that a stock is becoming overbought or overvalued and could be getting ready for a reversal while an RSI value of 30 and below indicate an oversell or an upcoming reversal  Our chart shows that UBA has an RSI of 66.143 which is below the overbought mark, we call it a buy especially for the day traders but could be a hold for longer tern traders.

Proshare Nigeria Pvt. Ltd.
Source: QFAc
 

Moving Average Convergence Divergence (MACD):
The MACD uses two lines to signal a buy or a sell, the faster line (MACD) and the slower line (signal).  The actual buy or sell signals are given when the two lines cross, such that a crossing by the faster MACD line above the slower signal line indicates a buy while a crossing of the MACD line below the signal line indicates a sell. For UBA, the MACD line just crossed the signal line indicating a buy 

Proshare Nigeria Pvt. Ltd.
Source: QFAc

Stochastic Oscillator:  The Stochastic indicator also uses two lines to signal buys or sells, the %K and %D lines. Buy signals are indicated when the fast %K line rises above 30 accompanied by a cross above the fast %D line while sell signals are indicated when the fast %K stochastic line falls below 80 and accompanied by a cross below the fast %D stochastic line.  

Proshare Nigeria Pvt. Ltd.
Source: QFAc

As indicated above, the fast %K rose above 30 and crossed above the fast %D on December 27th indicating a buy. 

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Summary:
Based on the above technical charts, we believe that the technical analysis is pointing to a buy signal for UBA. 

For complete list of picks or for analysis of any stock of interest, contact Analytics@mutualfundsnigeria.com

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