Last week, the Dubai Financial Market General Index (DFMGI) rallied 72.93 or 4.53 per cent to close at 1,683.41. Volume declined below the levels of the past couple of weeks but remained near the highs of the past two years. In other words, volume remains healthy reflecting continued interest from investors. The bullish move was widespread with 25 issues advancing and only six declining.
Even though there was a decent bounce last week, the DFMGI did not break through the recent high of 1,778.25 and therefore remains in a corrective mode off that high. As noted last week in this column, the index chart showed a short-term reversal pattern on the weekly chart from two weeks ago, and therefore a deeper pullback or consolidation remains likely before the DFMGI breaks above 1,778.25.
However, if a move above 1,778.25 does come in the near future that will signal a continuation of the eight-week uptrend. The DFMGI then targets the 1,851.50 to 1,887.21 resistance zone, followed by the 1,983 price area.
Important support remains at 1,591.84, the low of two weeks ago and low of the current pullback. A break below that level puts the 1,543 to 1,536 price support zone in sight. Other potential support areas below there include the 1,501 price area (previous support/resistance zone), followed by 1,479, the 61.8 per cent Fibonacci retracement of the eight-week uptrend. At this point the 1,479 price area would be considered the maximum drop lower that might be seen on a normal retracement of the eight-week uptrend. Fibonacci ratio analysis identifies potential support/resistance price levels based on an analysis of the trend. In this case the uptrend.
The Abu Dhabi Securities Exchange General Index (ADI) rallied 61.11 or 2.5 per cent last week to close at 2,625.85. Volume remained close to recent levels. Market breadth was also on the bullish side with 27 advancing issues and 10 declining.
Resistance at 2,642.66, the high from two weeks ago, remains an important price level to watch as a break above there will signal a continuation of the eight-week uptrend. The high from last week at 2,640.54 got very close to that higher resistance, but so far the ADI has been unable to break through it.
If the index can close above 2,642.66, it will then head towards the next resistance area around 2,673/74. A decisive close above 2,674 will put the ADI above a two-year downtrend line, another sign of strength pointing to a likely continuation higher from there.
There's still a good chance that the ADI needs to spend more time retracing or consolidating before it can move higher, if it is to eventually do so. Weekly support is at 2,535.67, the low from two weeks ago and bottom of the pullback that's been seen so far. Other support levels lower down include 2,512, 2,472, and 2,427. The lower support level is the 61.8 per cent Fibonacci retracement of the eight-week uptrend.
In the big picture, the ADI remains a bit weaker relative to the DFMGI as it has not yet broken above a previous swing high (2,777.21 from June 19, 2011), which is part of the price structure defining the long-term downtrend. The DFMGI however did break above and close above the swing high of 1,691.64 from April 2011 on a daily and weekly basis.
The price pattern that has been developing in the stock of Emaar Properties is similar to the Dubai market index. Last week's close at Dh3.10 puts Emaar back above a downtrend line begun from the October 2009 high. It's been above and below that resistance line several times over the past month.
A close above Dh3.22 signals a continuation of the uptrend and a breakaway from the trend line, which has been in place for over two years and therefore giving the first long-term bullish signal seen in some time.
Ras Al Khaimah Cem-ent is showing signs of strength that could lead to higher prices over the coming weeks and months. It broke out of a one-year downtrend a month ago and stayed above support of the related trend line since then. A bullish trend continuation signal is given on a decisive break above Dh0.85, the recent high.
Union National Bank has been consolidating for the past seven weeks, made an attempt to break out last week but closed right at resistance of Dh3.21. A decisive move above last week's high of Dh3.22 will give a new bullish signal.
Abu Dhabi National Energy Company (Taqa) broke higher last week on strong volume to close at a nine-month high of Dh1.32. This is bullish price behaviour with this stock now targeting the Dh1.44 resistance area.
Finally, National Bank of Abu Dhabi closed at Dh12.15 last week, a three and a half year high, and a breakout of a two and a half year consolidation period, that has seen this stock in a relatively stronger technical position than most of the listings in the UAE.
Bruce Powers, CMT, is a financial consultant, trader and educator based in Dubai, he can be reached at [email protected]
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