DFM tests 2000-point barrier as rally steadies

The Dubai Financial Market is expected to burst through its important resistance level of 2,000 points soon, even though the index tried to test this mark during the past two sessions but failed to hit it.

The general index rallied to the 1990 level for the second consecutive session yesterday, but then faced selling pressure which wiped out most of the days gains.

However, analysts stressed that the market was set for a rest after the strong rally during the past few sessions and would move in the uptrend at a slower pace, before gaining enough strength to break through the 2000 level.

"The DFM added 250 points in a week," said Mohamad Al Beheriri, Trading Manager at Amanah Financial Services. "This is very good rally and the index should rest before continuing its strong upward trend.

"It needs some time to absorb profit booking and selling pressures on stocks that have rallied during the past few sessions."

Al Beheiri said the index might be able to break through the 2000 level within a few sessions when profit booking declined. "We expect the market to go through the resistance and hit the next target of 2150 points very soon," he added. "The market is still bullish and there is strong buying at these current levels."

Shiv Prakash, an equity investment analyst at MAC Capital Advisors, said selling pressure was seen when the DFM neared the 2,000 mark.

"The market needs more power to break through this important resistance because when it was near 2,000, selling intensified due to worries among investors about the outlook for the global markets," he added. "However there are positive signals. When selling dragged the index down we noticed quick buying at lower levels in the same session, which maintained the uptrend."

A similar trading pattern has been observed during the past few weeks in the course of index rallies on the Dubai exchange. Two weeks ago, when the index was trying to break through its critical level of 1,680 points, it tested this level for several sessions before crossing it.

Al Beheiri explained that this trend in the market reflects a return to normal movements. "Panic selling and unexpected movements in the DFM index are over and the market has returned to normal behaviour patterns. This is giving the index more consolidation at the current level and is increasing confidence among investors."