Dubai bourse gives up gains while Abu Dhabi remains flat

ast week the Dubai Financial Market General Index (DFMGI) dropped by 80.22 or 2.25 per cent to close at 3,492.22, its worst performance in 13 weeks. Volume dipped slightly below the prior week’s level, while most stocks fell. There were only four advancing issues against 30 declining.

The DFMGI fell to a three-week low of 3,441.90 by Thursday, found support around the 55-week exponential moving average (ema) and bounced from there. This was the second time the 55-week ema has been tested as support and held since the index moved above it seven weeks ago. Last week’s drop follows a brief move into a new high for 2016 two weeks ago, which was at 3,623.70. Rather than seeing upward momentum increase as a bullish trend continuation signal was given when the DFMGI moved above the previous 2016 high of 3,604.70, selling pressure intensified leading to a pullback. That pullback may have completed as of last week’s low as Thursday’s close was at the high of the day following the drop to a three-week low.

The short-term uptrend remains intact as long as the index doesn’t fall below the prior swing low at 3,430.15. If it does then the chance of making a new high for 2016 in the near future diminishes. The next support zone of note would then be around 3,378 to 3,357.

A rally above the 3,623.70 peak signals a bullish trend continuation. That would be the second time the DFMGI exceeded the 2016 high from April and it should be followed by an improvement in upward momentum. The index would first be heading towards a price zone of 3,740 to 3,762, and then 3,913 to 3,985.

Abu Dhabi

The Abu Dhabi Securities Exchange General Index (ADI) was again close to flat for the week, ending up 1.38 or 0.03 per cent to close at 4,519.83. There were 11 advancing issues and 15 declining, while volume dipped slightly below the prior week’s level.

For a little over three weeks the ADI has been consolidating within a relatively General Index 1-week change 1-week % change Advanced Declined tight range at support of the 55-day ema. The high of the range is at 4,583.36 and the low is at 4,486.04, while the 55day ema is now at 4,505.17. A rally above the high of the range is bullish, but at that point the ADI will be close to a resistance zone defined by the two peaks for 2016. Those peaks run from the more recent swing high at 4,621.50 and up to the 2016 high of 4,637.24.

A daily close above the higher price level is needed for the next bullish trend continuation signal. The ADI’s action in recent months continues to support the probability that it will eventually move higher or at least attempt to do so. It has advanced above the long-term downtrend line (although only by a little so far), the long-term 200-week ema is again angled up after being sideways for a number of months, and the shorterterm 21-week ema has crossed above the intermediate-term 55-week ema. In the interim further consolidation or a deeper pullback is possible.

The low of the three-week range at 4,486 is the key price level to watch on the downside as a drop below it will likely lead to lower prices. In that case watch for a decline to at least the area of the 200day ema, which is now at 4,428.81.

Stocks to watch

Since hitting a high of 4.65 for 2016 seven weeks ago Union National Bank has been consolidating in a descending channel or bullish flag pattern. Last week it closed up by 0.45 per cent at 4.45.

The retracement is normal and healthy for the stock as the pullback has been slow with relatively low volatility. It follows a sharp 37.6 per cent seventeen-day rally that put Union National at a new 2016 high and back above its 200-day ema in early-July. So far the pullback has found support at the 200day ema. The stock had been below its long-term 200-day ema since August of last year. It was resistance and now is showing as support, which is additional bullish behaviour.

A bullish trend continuation signal is given on an advance above 4.65, with a more aggressive trigger on a move above 4.58. Based on the flag pattern, the objective from a breakout would be around 5.52.

For the past several weeks Aramex has been in a retracement following a 14-day 38.4 per cent advance on heavy volume that hit resistance at 4.18, a new 10-year high. The rally included a breakout of a two-year basing pattern as it jumped above 3.65.

This is very bullish behaviour which will likely lead to further upside for Aramex once the retracement is complete. The pattern would also be considered to be a bullish flag. If there is a decisive rally above 3.93 in the near-term then a breakout of the flag may be occurring, with the breakout confirmed on a move above 4.18. A minimum target based only from the flag formation would be around 4.65.

Bruce Powers, CMT, is chief technical analyst at www.MarketsToday.net. He is based in Dubai. Sensex (IN)