Buyers return to UAE markets as Dubai volumes hit 3-week high

he Dubai Financial Market General Index (DFMGI) jumped by 85.92 or 2.47 per cent to end at 3,566.35. That’s the highest weekly closing price in five weeks and the largest one-week gain in 12 weeks. Most of the issues were up, with 28 advancing and only six declining, while volume improved to a three-week high.

Last week’s strong performance improves the chance that the 3,435.14 low from two weeks ago completes the correction off the 2017 peak of 3,738.69. At the low the DFMGI had fallen as much as 8.1 per cent. As long as the index continues to hold above the two-week low it has a chance to go higher.

The overall bullish uptrend (starting from January 2016 low) price structure remains intact with a series of higher swing highs and higher swing lows. Further, as of last week the index has closed back above both the 200-day exponential moving average (ema) and 55-day ema on a daily basis, and it is back above the long-term uptrend line. That line was broken to the downside several weeks ago, but strength returned before price went to much below the line thereby giving a false breakdown.

The DFMGI is now heading up into a fairly large potential resistance zone caused by consolidation early in the year. How it behaves as it moves higher will be telling particularly if strong upward momentum can be sustained for another one to two weeks. The key question is: will the DFMGI eventually be able to breakout above the 2017 high and run up from there? As of last week’s close it is 4.8 per cent away from the 2017 high.

That question cannot be answered yet, however, assuming the recent correction is complete the index now has a chance to do so in the foreseeable future. Until then we assume that short-term resistance may be hit on the way up leading to pull backs.

The first price area to watch for some resistance is around 3,604 to 3,624. That price zone is then followed by the 3,655 price area, and finally the 2017 peak of 3,738.69. A daily close above that peak triggers a bullish continuation of the longterm uptrend.

As noted above the 3,435.14 price zone General Index 1-week change 1-week % change Advanced Declined is the closest important support area. If violated to the downside the long-term uptrend structure is at risk with a drop to as low as 3,91.49 possible.

Abu Dhabi

The Abu Dhabi Securities Exchange General Index (ADI) gained 171.80 or 3.86 per cent last week to end at 4,615.23. That’s the highest weekly closing price in six weeks and the strongest performance in 17 weeks. There were 21 advancing issues and 14 declining, while volume reached a five-week high.

The ADI completed its most recent correction at the 4,355.26 low hit four weeks ago. At that point the index had fallen 7.6 per cent below its 2017 high of 4,715.05. It has since recovered nicely, up 6.9 per cent as of last week’s high of 4,655.81. The 2017 high is now only 2.2 per cent away.

During the recent correction the ADI found support at its long-term uptrend line. The integrity of the line was maintained as the index did not close below that line on a daily basis. Therefore, the long-term uptrend remains solid with a test of the 2017 high likely in the foreseeable future. And of course given that the integrity of the uptrend was sustained during the retracement there is a good chance the 2017 high will be exceeded to the upside. If that occurs the next higher target would first be around the 2015 high of 4,902.09. On the downside, a drop below 4,355.26 puts the bullish momentum of the uptrend at risk. Further selling could occur or a consolidation phase. Before then watch for retracements to again find support around the uptrend line.

Stocks to watch

DXB Entertainments may be close to turning the corner. The stock has been in a steady downtrend since hitting a high of 1.77 back in August of last year. The low of that decline is at 0.985 from two weeks ago. For the most recent five weeks DXB has been consolidating around that support level, which is close to a 1.06 support zone from January 2016.

A potential double bottom trend reversal Sensex (IN) 3870.00 pattern has formed on the daily chart. And we have bullish divergence in the 14day Relative Strength Index momentum oscillator. This is where the momentum indicator is showing signs of underlying strength coming into the stock as it consolidates around the bottom. Last week DXB was up 0.98 per cent to close at 1.03.

Watch for a decisive rally above 1.06 to signal a bullish breakout of the double bottom. The stock will then also be the furthest above its 21-day ema since October, providing another signal for a likely change in trend. Following a breakout the first lower target zone would be around 1.22. The next more significant potential support zone would then follow around 1.37.

Alternatively, a drop below and daily close below the recent 0.985 low, either before or after a breakout of the double bottom will be bearish.

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