31/12/2017 06:30 AST
Last week the Dubai Financial Market General Index (DFMGI) ended up by only 4.98 or 0.15 per cent to close at 3,370.07. There were 13 advancing issues while 21 fell. Volume fell only slightly below the prior week’s level.
Although last week’s performance was nothing too exciting, there were some signs that the index is getting closer to turning back up. It fell to a new trend low earlier in the week, falling below the long-term uptrend line and closing below it on a daily basis. Yet, by the end of the week the DFMGI had recovered to close in the top quarter of the week’s range and was clearly back above the uptrend line. The low for the week was 3,325.98. It is generally considered bullish when price first triggers a bearish signal and then quickly flips to start showing signs of strength. Another sign of strength is that the week ended at a three-week closing high. Together, this seems to point to higher prices in the near-term.
The next sign of strength is on a move above the two-week high of 3,381, with potential resistance around the downtrend line. That trend line looks to be around 3,409, but the price represented will depend on when it is reached.
As discussed over the past couple of weeks the DFMGI has been declining in a downward slopping consolidation trend channel for the past month or so. That channel can be expected to continue to form until there is a daily close above the downtrend line. More significantly, a rally above the most recent swing high of 3,454.35 is need for a sign that the index may be reversing out of the declining channel. At that point the DFMGI would next be targeting the swing high of 3,505, followed by 3,538, and then 3,560.
Abu Dhabi
The Abu Dhabi Securities Exchange General Index (ADI) advanced by 49.29 or 1.13 per cent last week to end at 4,398.44. Market breadth was supportive of the bullish move, with 20 advancing issues and 14 declining, while volume jumped to an 11-week high.
A continuation of the short-term pullback was seen early in the week with the ADI finding support at 4,304.98 Tuesday, before turning up with some enthusiasm the remainder of the week. Volume increased to a 14-week high on Thursday’s 0.73 per cent advance. In addition, the week ended strong, at the high for the week and an eight-week weekly closing high. Plus the close was above the high of the prior week and signalled a bullish trend continuation of the three-week up trend.
The above signs point to a likely continuation higher. However, the ADI is heading further up into a consolidation pattern. Therefore, resistance could be seen at any number of price levels on the way up. The next key level to watch is the most recent swing high of 4,531.65, following by the preceding swing high at 4,608.64.
A daily close above the 4,531.65 swing high will give a bullish signal and also be a breakout above the downtrend line starting from the 2017 peak. That could start to change the overall outlook to bullish if it happens. Until then we can anticipate resistance on the way up towards the line and prior swing high.
Stocks to watch
A possible double bottom trend reversal pattern is setting up in the daily chart of Arabtec Holding. Last week the stock was flat, closing at 2.38.
Arabtec’s first bottom was four weeks ago at 2.30, while last week’s low of 2.32 creates the second potential bottom. It is not yet clear that last week’s low will turn into a bottom and therefore it remains a potential bottom. As with any reversal pattern a breakout signal is needed to confirm the pattern. A decisive move above 2.50 will provide a bullish breakout signal for Arabtec, with a daily close then needed above the price level to confirm strength.
In this case, the double bottom pattern is relatively small. Therefore, even though a bullish signal would be given on a breakout of this pattern there is no assurance that it will bring an end to the l
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