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As stocks have gone back to near their all-time low prices, banking stocks are trading lower compared to their 2017 peaks which present relatively bargain opportunities for medium to long term buyers seeking capital appreciations.

While looking at the charts of all the top tier banks on monthly timeframe, I discovered interesting investing opportunities on Access bank. Besides, the combination of the bank’s impressive Q2 results in 2019, and technical setups could add to its capital appreciation between October 2019 and April 2020.

Technical Analysis

Access Bank has delivered an exceptional YTD result that beats the overall market index return of -11%, creating value for its investors this year. Starting from January, Access bank has generated 8.82% on a year-to-date basis, 13.85% and 14.73% in 3 and 6 months respectively.

However, as good as these returns have been compared to other banks, there seems to be room for further appreciation if you look at technical setup on the monthly chart using MACD.

For some of us that don’t know what MACD is, it means Moving Average Convergence Divergence, a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. Moving Average Convergence Divergence. (More details here)

The signal generated by the MACD on a higher timeframe tends to give accurate buy or sell signal compared to a lower timeframe.

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Find below the chart of Access bank on the monthly timeframe and why you should consider adding the banking stock to your portfolio right now.

The chart shows the bank’s historical prices for 6 years (2013 to 2019).

  • On the first crossover to the downside (A to B), the stock shed 41% of its value to close at N5.55 from N9.55 between Oct 1, 2013, to April 4th, 2016.
  • The next crossover to the upside (B to C) was followed by a 95% stock appreciation, between May 2nd 2016 and June 1, 2018. Access went from N5.77 to N11.15 before nosediving back to its 2019 low of N5.46 (C to D).
  • If region marked “D” becomes another confirmed crossover signal generated by MACD, we may witness another upside potential to N10 which is a 42% return from N7.40.

Latest Financials:

Using today’s closing price of N7.4, Access bank has appreciated by 35% from this year’s low, a price gain that isn’t unconnected to the bank’s improved financials and positive investors’ sentiment.

In its latest Q2 result, 2019, the bank reported a 92.8% increased in net interest income after accounting for impairment charges; net interest income prints at N150.2b compared to N77.9b reported in the previous comparable period. Profit after tax for the period was N63b, an increase of 59% over N39.6b in Q2, 2018.

Future Outlook

As the bank looks to deepens its retail banking strategy, aggressively push its newly launched Quickbucks personal/payday loan app to verified salary earners and consolidate its e-banking/mobile channels after Diamond bank acquisition, I have no doubt that Q3 result will also surpass the previous year’s figure, which should pave the way for an impressive full-year result.

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What is the Best Entry Price?

Personally, I am more comfortable building my Access bank’s stock at a maximum price of N7.2 or less

Disclaimer: The opinion shared here is my personal view on this stock. I own Access bank.

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Written by

Oge

Hi!, I am Oge, a freelance stock research analyst. I am here to share practical little known stock market and related investment opportunities you can bank on. If you want to be among the 1% of investors that make a real profit from Nigeria stock market, do visit this blog for independent stock analysis and price forecast.

I use stock data and chart analysis to help first-timers learn stock market investing, pick the right stocks and become profitable traders. When I am not trading stock, I spend my free time studying Rhapsody of Realities.