Dubai hits two-year low, while Abu Dhabi maintains support

Last week the Dubai Financial Market General Index (DFMGI) fell hard after dropping through key support levels — ending down 259.61 or 8.10 per cent to close at 2,944.67. That’s the biggest oneweek drop in 12 months, and the lowest price in two years. For 2015 the DFMGI is down 22.0 per cent, and is 30.8 per cent below the year’s peak of 4,253.28. Most issues fell and volume reached a three-week high. There were 34 declining stocks against five advancing.

Selling continued into the close, with the index ending near the low for the week, which was at 2,942.06. The week ended with the DFMGI below the December 2014 spike low of 2,992.53 (key two-year support), and below its 200-week simple moving average (sma) (3,095) for the first time since December 2012. Therefore, a bearish trend continuation signal has now been triggered. The DFMGI is down as much as 45.5 per cent from its 2014 peak of 5,406.52.

Although the DFMGI may fall further in the near-term, it has reached a potential support zone. Both the 200-week sma and long-term uptrend line define the support parameters of the long-term uptrend at an angle. A weekly close below that sma is bearish overall. However, this is the first test of the 200-week sma as support since the index moved above it in December 2012. So far it has failed as support given last week’s close below it. But since this is the first time the index has approached the 200-week sma since going above it, a rally would not be uncommon before it goes too much lower.

In addition, and significantly, support of the long-term uptrend line (drawn from January 2012 low) is at or close last week’s low, along with previous resistance (now support) around 2,952 from October 2013. Further, a 61.8 per cent Fibonacci retracement of the long-term uptrend (January 2012 low to May 2014 peak) completes at 2,865.04. If the DFMGI continues to fall further from there, then next watch for support around 2,755, which was both support and resistance back in August and November of 2013.

Dubai

General Index 1-week change 1-week % change Advanced Declined

At this point, the first sign of strength is on a daily close above last Thursday’s high of 3,031.25, and then above 3,051.56, Wednesday’s high. Higher resistance then starts around 3,128, and is followed by a resistance zone from approximately 3,233 to 3,302.

Abu Dhabi

Value

Top Weekly Gainers:

NCC TAKAFUL-EM AMAN DARTAKAFUL DNIR AKIC TAQA ADSB NBAD RAKCC

Top Weekly Decliners:

AMLAK ALMADINA.DFM DAMAC DIB ARTC UNB INVESTB GCEM ESHRAQ NBF

The Abu Dhabi Securities Exchange General Index (ADI) dropped by 150.06 or 3.54 per cent last week to close at 4,085.33. There were 26 declining issues and only seven that advanced, while volume rose slightly to a nine-week high. Year-to-date the ADI is down 9.8 per cent, and 16.6 per cent below the 2015 peak. From the May 2014 peak of 5,255.32, an almost 10-year high, the ADI is down 22.2 per cent as of last week’s close.

The technical damage to the ADI has not been as severe as in the DFMGI, at least so far. It managed to hold above support of the 2015 low at 4,069.11, which was reached in August, and remains in the general area of support of

Close

3.38 1.6 0.535 0.437 2.61 0.35 0.48 2.84 8 0.9

Close

1.19 0.454 2.12 5.59 0.981 4.5 1.8 1.01 0.46 3.15

Change

0.13 0.05 0.015 0.004 0.01 0.03 0.03 0.13 0.35 0.03

Change

-0.25 -0.095 -0.39 -0.81 -0.119 -0.59 -0.2 -0.11 -0.05 -0.34

%Chg

%Chg

its 200-week exponential moving average (ema) (4,136.25). By comparison, the DFMGI has fallen well below its 200week ema starting five weeks ago.

Given the overall bearish pattern in the chart of the ADI, along with the degree of selling pressure seen in the DFMGI, it looks likely that lower support levels will eventually be tested. Whether that test comes before a bounce or not remains to be seen. The next lower support zone of significance is from approximately 3,904 to 3,876.

If a bounce does come before the ADI moves lower, first watch for resistance around 4,169, followed by a price range from 4,252 to 4,274.

Stocks to watch

4.00% 3.23% 2.88% 0.92% 0.38% 9.37% 6.67% 4.80% 4.58% 3.45% -17.36% -17.30% -15.54% -12.66% -10.82% -11.59% -10.00% -9.82% -9.80% -9.74%

DMF General Index

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2015

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Drake & Scull fell 9.46 per cent last week to end at 0.38, while volume jumped to an eight-week high. Although the stock is the second worst performer in the Dubai market this year, having fallen 57.2 per cent, it is sitting right on a potential support area that could lead to

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2014 MJS

2015 M

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2016 a counter-trend rally higher. This is an aggressive set-up given Drake & Scull’s overall weak performance.

Four weeks ago the stock found support at 0.374, ending a five-week sell-off, as selling dominance reversed to buying dominance within one week, as the period ended positive and in the top quarter of the week’s high-to-low range. Last week the stock began a test of the 0.374 support area as it dropped to a low of 0.38. A decisive drop below 0.374 will trigger a continuation of the bear trend.

However, a rally above last Thursday’s high of 0.41 will be an early sign of strength, with additional bullish signals on a move above 0.44, and then above 0.454. Based on the distance of the first rally off the bottom a month ago, the potential minimum target is around 0.53, if a bullish trigger occurs.

Bruce Powers, CMT, is president of WideVision and chief technical analyst at www.MarketsToday.net. He is based in Dubai.