Getting the best of the Short term investment strategy (1)
June 23rd, 2008 Tunde Brown || tunde.brown@stockmarketnigeria.com
In recent times, the majority of those exploring the Nigerian Stock Exchange as a means of wealth creation and preservation have been those who seek to make the best of their resources in the medium and short term in particular. It would not be far from the truth to state that the greater part of this group go about their mission with little or no research nor information and hearsay. But by and large, profiting from the stock market in Nigeria involves much more than an uninformed and casual approach, whether the objectives are in the short, medium or long term.
Using some of the basic information in the Stock Exchange Daily Official List, an investor could put one and one together for credible inputs in the decision making process. The short-term perspective for investing requires the ability to utilize basic indices to track temporary developments that offer edge opportunities that could be quickly taken advantage of. Some figures like the number of deals, volume traded, price appreciation, could offer a mix capable giving a hint on the days ahead for a stock listed on the Nigerian Stock Exchange.
Number of deals connotes the number of times a particular stock was traded (bought and sold) in a day of trading, or the period of reference. Volume traded means the quantity of the shares of a company traded within the period of reference. Between these two figures there are various scenarios that could play out. Renowned stock analyst, Abayomi Obabolujo, posits that, “the best measure (for determining the most active stocks) should primarily be the (number of) deals and secondly, the volume, if at all”.
High deals with high price appreciation, Obabolujo states, indicates availability. This scenario shows that there are more sellers than buyers, a trend that portends a declining motion despite the obvious price appreciation. He advises that this trend be avoided particularly if it has played out for some time, as a possibility of that stock gradually diminishimg looms, such that losses become very likely.
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