10/09/2017 06:10 AST
Last week the Dubai Financial Market General Index (DFMGI) was relatively flat, up only 6.76 or 0.19 per cent to end at 3,644.31. As was the case the previous week, last week there were only four trading days in the UAE markets due to the holiday. Regardless, volume moved higher, above the prior week’s high. At the same time market breadth was weak, with 12 advancing issues against 22 declining.
There was a short-term bullish trend continuation signal generated last week as the two-week high of 3,639.01 was exceeded. In addition, the close was strong, very close to the high for the week. The high for the week was 3,644.56.
Regardless of last week’s short-term bullish behaviour, it’s still not clear whether the index will make it above the most recent swing high of 3,681.11 and keep going. The current three-week bounce follows the first decline off that swing high. Either we see a failure and subsequent turn back down from the current bounce, or the peak is exceeded to the upside. So far the behaviour of the index is saying that it will continue to the upside. But, that could change at any moment.
Of course, a breakout above the swing high would be the bullish scenario. In that case, a test of resistance around the 2017 high of 3,738.69 and probable eventual breakout above that high is likely. At that point the DFMGI would next be heading towards the 3,957 price zone, followed by the 4,250 area.
A drop below last week’s low of 3,617.64 reflects short-term weakness with the two-week low of 3,589.45 the next lower target. However, the key price level to watch is the recent swing low of 3,560.04. If it’s broken to the downside then a short-term bearish trend continuation signal is generated, meaning that the first drop off the recent swing high of 3,681.11 has been followed by a second leg down. Lower support zones include the 3,465, followed by 3,371.
Abu Dhabi
The Abu Dhabi Securities Exchange General Index (ADI) dropped by 14.70 or 0.33 per cent last week to close at 4,453.71. Volume spiked to a 12-week low even with the shorter trading week. On its face this is bearish, while there were 13 advancing issues and 17 declining.
There are other bearish signs. Support last week was seen at 4,450.40, right around the 4,451.20 low of the prior three weeks. However, last week’s close was the lowest weekly close in nine weeks. Also important is that earlier in the week the index started to break out above the highs of the previous two weeks, but the direction was reversed with selling pressure pushing down the index to close near the low for the week.
A drop below last week’s low will give a bearish trend continuation signal, which is confirmed on daily close below that low. The key support level then is the 2017 lows of 4,358 to 4,355.
If we step back for a moment and look at the larger consolidation pattern that has developed this year a large descending triangle becomes apparent. This is bearish consolidation pattern where support is seen on the horizontal, but the top of the pattern is a series of lower peaks. In other words, a trend line across the top of the pattern is declining.
Regardless of the above bearish analysis, the next direction of price will be telling. If the ADI breaks out higher above last week’s high, then further upside becomes more likely. In that case the above bearish scenario is less likely.
Stocks to watch
It is interesting and potentially significant to look at the recent performance of bellwether Emaar Properties and the continued strength seen in its chart. The stock makes up the largest position of the DFMGI of 22.7 per cent as of July. That’s a significant piece of the Dubai index and therefore recent strength could be a precursor to additional bullish moves in the wider market.
Emaar Properties has been rolling steadily higher for the past four months creating a series of higher monthly highs and h
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