Investors in the Nigerian market hit the panic button today as the NSEASI sold off over 1,156 points in a single day. This is a classic panic sell-off made up of a large percentage downward momentum in a single day with a surge in volume, all of the NSE-30 components going down.
So, what does one do in such classic panic sell-offs like this? Well, they serve to lure dump investors into the short rally by the end of the day just to be taken out the next day. Almost all classical panic sell-offs end with an up day the next day as investors take advantage of the suddenly low price over not too strong reason.
Especially with the NSEASI now near critical long-term support level @ 32,000 ranging from 2006, 2013 and 2016 as shown in the below chart, it seems much more possible that the bulls are going to take back some ground above this level.
The market may rally in the coming trading days but we suspect the existence of a bull trap in the short-term.