Dubai: Last week the Dubai Financial Market General Index (DFMGI) fell by 21.67 or 0.59 per cent to end at 3,651.10. Market breadth leant on the bearish side but not by much. There were 15 advancing issues against 20 declining, while volume dipped below the prior week.
The DFMGI made an attempt to continue its ascent at the start of the week but was quickly rebuffed at the week’s high of 3,684.19. That was a new eight-month high but the day closed near the low of the day, clearly a failed breakout, at least for now.
Regardless, the general trajectory of price behaviour continues to point higher. After a continuation of the pullback off last week’s high the index managed to end the week relatively close the recent highs, and just at support of the downtrend line starting from the early-August peak. The overall retracement off the high was approximately 50 per cent of the most recent upswing, a respectable pullback with a quick recovery.
A daily close above the early-August high of 3,681.11 is now needed to trigger a continuation of the intermediate-term bull trend. Notice how the volatility over the past week-and-a-half or so has become more sporadic. This reflects the fight that is going on between the bulls and the bears as the market tries to determine whether it continues the bull trend or chops around longer thereby extending the consolidation pattern of the past few months.
This type of price behaviour or hesitation is actually healthy for the bull trend as an upside breakout will quickly hit the resistance area of the 2017 peak, which has a high of 3,738.69. It therefore needs to build up energy so when it does move higher, if it does, there is a chance that it can breakout above the 2017 high on that initial thrust higher.
It’s also possible that resistance continues to put downward pressure on the DFMGI and it eventually succumbs by taking another dip lower. This will not be apparent unless there is a drop below last week’s low of 3,603.15. At that point it wouldn’t be surprising to see the index test the most recent low price zone around 3,538.03.
Abu Dhabi
The Abu Dhabi Securities Exchange General Index (ADI) dropped by 37.59 or 0.83 per cent last week to close at 4,467.72. There were 11 advancing issues and 22 declining, while volume fell to an eight-week low.
So far the ADI has declined almost 50 per cent of the most recent rally since hitting the 4,531.65 high two weeks ago. However, the index closed weak last week, near the low of week’s range of 4,465.84. This would indicate that it may have further to fall in the short-term before completing the retracement. Nevertheless, given the sharp 2.5 per cent one-week rally three weeks ago, it would seem that support will be seen and that strength will return once the current pullback is resolved.
At the same time, keep in mind that overall the ADI remains within a large consolidation pattern that has been evolving since the early part of the year. Therefore, short-term trends have a tendency to be cut short with mediocre follow-through disappointing investors.
On a move lower next watch for support around the 61.8 per cent Fibonacci retracement at 4,446.17. Look at that price area as a zone because it is in the area of prior weekly support as seen several times over the past eight months.
Stocks to watch
Deyaar Development was up 1.85 per cent last week to close at 0.55. It attempted to breakout above the most recent prior swing high of 0.551 from July but closed right at that price level after rising to 0.565 last Thursday.
What is interesting about this stock is the volume levels of the past two weeks. Last week’s volume was the highest since December and the week before volume reached the highest level since January. This rising volume seems to indicate that Deyaar is being accumulated by investors and eventually buying pressure will be enough for the stock to continue higher.
Watch for a daily close above 0.551 to confirm a bullish signal with the stock then heading towards resistance of two earlier peaks from 2016 and this year, around 0.684 to 0.707. A subsequent daily close above that potential resistance zone will provide a more bullish signal and the likely completion of a bottom that has been developing since the low of 0.391 in January 2016.
Watch for support at the two-week low of 0.51 as a drop below it could lead to further consolidation and expansion of the bottoming pattern rather than a continuation higher in the near term.
Another stock to watch is Dubai Investments. It broke out to a 26-month high on heavy volume last week as it rallied above 2.54 and closed above it on a daily basis. Volume was the highest level since April 2016. The stock closed at 2.60, up 3.59 per cent for the week. It next heads towards the 2015 highs from around 2.90 to 3.05.
Watch for short-term weakness for opportunities to enter at lower prices to take advantage of what is likely to be the beginning of a trend continuation move higher. Support is at the two-week lows around 2.46.
Bruce Powers, CMT, is a technical analyst and global market strategist.
