15/05/2016 05:24 AST
The Dubai Financial Market General Index (DFMGI) rose by 37.06 or 1.12 per cent last week to end at 3,344.67. Market breadth supported the bullish move with 23 advancing issues and 10 declining, while volume reached a three-week high. This was the first week in three that the index ended stronger.
The DFMGI managed to hold above support of 3,255.96 reached two weeks ago, which is part of a support zone down to 3,248. This behaviour remains short-term bullish. At the same time the intermediate-term trend indicator, the 55-day exponential moving average (ema) was breached to the downside two weeks ago for the first time since mid-February and the DFMGI has closed below it for the past seven days. Although it was exceeded to the upside briefly on Thursday there was not close above it. This is a warning for the strength of the intermediate-trend.
A daily close above the 55-day, which is now at 3,354.93, will provide the first short-term bullish signal indicating that the DFMGI has further to bounce off of the two-week support zone. Further strength is indicated on a daily close above last week’s high of 3,373.22. The first target zone would then be around 3,408 (200-day ema) to 3,433, followed by the two-week high at 3,495.24. The 55-week ema is also nearby at 3,475.70, and could easily act as resistance when approached as well. Further, it is also in the area of the long-term downtrend line, which will usually act as resistance.
If the lower price level is breached to the downside then the index will likely fall to at least the 3,189 to 3,166 support zone, or the 3,124 area. Further down is a more critical price area around 2,964. That was prior swing low support from early-February, that led to a continuation of the uptrend. If broken to the downside the uptrend price chart structure deteriorates further.
Abu Dhabi
Last week the Abu Dhabi Securities Exchange General Index (ADI) weakened by 41.36 or 0.93 per cent to close at 4,387.25, the third consecutive week of declines. There were 17 advancing issues against 20 declining, while volume increased to a three-week high.
Following a bounce earlier in the week the ADI finished weak, near the two-week low of 4,368.65 and the low for the week (4,376.29), as well as close to support of the 200-day ema at 4,379.34. The behaviour of the past couple of weeks, which included only a three-day bounce before selling again dominated, is not what one would like to see for confidence that the index can rally higher in the near-term. At the same time the two-week support is holding. If strength does come back look for confirmation on a move above last week’s high of 4,477.13, with the ADI then targeting a 4,537 resistance zone.
A decisive drop below the two-week low triggers a bearish trend continuation and puts the ADI back below the important 200-day ema long-term trend indicator. The next support zone would then be around 4,300 to 4,265, followed by a price zone from approximately 4,166 to 4,140. That lower zone starts with the 200-week ema and ends with prior weekly price levels. Further down is support from the swing low in February, which is around 4,045.
A decisive drop below the 4,265 level is the first clear indication that the uptrend off the January lows may be starting to reverse. So far what we’ve seen off the 2016 high of 4,637.24 is a normal retracement in an uptrend. In the bigger picture the ADI remains in a long-term descending trend channel and a daily close below 4,265 increases the possibility that the ADI will eventually test support of the January lows to some degree.
Stocks to watch
Amanat Holdings broke down from a head and shoulders top trend reversal pattern two weeks ago before bouncing off support of its 200-day ema (0.82) on Wednesday. The breakdown also put the stock below its eight-month uptrend line. Together, this analysis increases the odds that Amanat will e
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