Dubai

The Dubai Financial Market General Index (DFMGI) was up 30.85 or 0.86 per cent last week to close at 3,606.17. This is the fourth consecutive positive week for the index and the highest weekly close in twenty-two weeks. Most issues showed strength with 24 advancing issues and 14 declining, while volume dipped slightly below the prior week’s level.

A bullish trend continuation was triggered as the DFMGI reached a high of 3,616.55 which exceeded the prior weeks high. The short-term trend is now heading into its fourth week and is evidenced by the series of higher weekly highs and higher weekly low.

Last week was the second week in a row where the index ended above the 3,573.25 swing high from April. This is bullish behaviour as that high was an ideal spot to see resistance pick up and the index to turn down. Instead it has stayed strong, closing for two weeks in a row the April high. It looks like then that the index may keep climbing higher before we see a pull back. Its been pushing up against the bottom of the next resistance zone above the April peak for the past two weeks. That zone starts around 3,604.70 and goes up to roughly the 3,658.51 peak from December. A daily close above last week’s high increases the chance that the DFMGI is next heading towards the December peak.

The 3,568.53 low from last week is near-term support. As long as the index stays above that price level the short-term uptrend is retained. A drop below it will likely be followed by further weakness, possibly down to weekly support of 3,537, followed by 3,505.

Nevertheless, since we’ve closed above the April high on a weekly basis any pullback could be short lived. Exceeding that high is a violation of the downtrend price structure that began from the 2017 high of 3,738.69 and is therefore a bullish sign. We continue to have a good chance of eventually testing and possibly exceeding the 2017 high.

Abu Dhabi

Last week the Abu Dhabi Securities Exchange General Index (ADI) increased by 15.79 or 0.35 per cent to close at 4,568.28. That’s the highest weekly close in 10 weeks. However, market breadth was weak with only 12 advancing issues against 23 declining, while volume dipped slightly to a four-week low.

Resistance was seen last week at 4,568.28, right up against the resistance area represented by the intersection of the long-term uptrend line and the intermediate-term downtrend line. That zone was broken two weeks ago briefly, before resistance was seen at 4,596.26. Subsequently, the index retraced to last week’s low of 4,511.86. By the end of last week the ADI had rallied off that low reaching a six-day closing high. This is bullish behaviour indicating that the retracement might be complete. If so then there’s a good chance the two-week high may be exceeded in the relatively near future.

The 4,596.26 swing high is part of a series of lower swing highs that make up the top of a relatively wide ranging descending trend channel that has been developing in the ADI over the past six months or so. If the ADI can get over the high on a daily closing basis the pattern of lower swing highs is violated thereby opening up the possibility for a run towards the 2017 high of 4,715.05. That’s only above 3.2 per cent above last week’s closing price. In addition, a decisive breakout above the downtrend line will have occurred.

First though the index needs to get above lower peaks at 4,627.77, 4,655.81, and 4,668.77. Each is an area where resistance might be seen.

Stocks to Watch

Big volume last week in Dubai Islamic Insurance & Reinsurance helped put the stock in the top position in the Dubai market, with it rising 10.14 per cent for the week to end at 0.999. Weekly volume reached a six-month high.

Last week’s move was further follow through on the larger bullish trend that has been developing since the swing low of 0.468 in November. Dubai Islamic had a massive 165 per cent jump in nine weeks off that low. Over the subsequent nineteen weeks it retraced forming a low range parallel channel. Support was found at 0.67 nine weeks ago. Together, the sharp rally followed by a descending horizontal channel created a bull flag pattern.

The second part of the rally resumed on a breakout of the bull flag nine weeks ago. Resistance was subsequently seen at 1.07. This led to a pull back to support at 0.787 six weeks ago. Last week’s rally continued the advance off the six-week low with Dubai Islamic ending the week at its highest weekly closing price in 24 weeks. The advance also triggered a breakout above the six-week high.

The bottom line is that the various price patterns and price behaviour since November are pointing to higher prices for Dubai Islamic. Last week’s high of 1.06 along with the prior swing high at 1.07 together create a resistance zone that needs to be exceeded to the upside for the next bullish confirmation. Once that occurs, given the patterns discussed, the stock has a good chance of getting over the 2017 high of 1.24.

Bruce Powers, CMT, is chief technical analyst at www.MarketsToday.net.