UAE market patterns continue to form before the next move
The Dubai Financial Market General Index (DFMGI) was flat last week, rising only 2.41 or 0.09 per cent to close at 2,757.73. There were 19 advancing issues against 15 declining, while volume jumped to its highest level in five weeks.
Last week, the index fell to a new bear trend low of 2,708.42 earlier in the week before bouncing higher for the last three days of the week. By the time the week ended the index was almost exactly where it ended the prior week. Healthy volume under these circumstances may be pointing to further upside.
In the weekly chart, this price behaviour has created a doji reversal candlestick pattern. The pattern reflects the dominance of sellers earlier in the week as the bear trend was extended to the downside. However, by the end of the week sentiment had changed as buying pressure was able to reverse the direction. That bullish reversal now has the potential for upside follow-through.
Keep in mind that the doji reversal one-week candle doesn’t signify any significant reversal in the overall declining trend. At this point a daily close above a resistance ridge around 2,854.49 would first be needed to show strength, and then a daily close above the swing high of 2,986.36.
An upside breach of 2,986.36 would be bullish. In addition a breakout of a bullish descending wedge would also occur. This essentially is a form of consolidation that is falling and in this case would be a reversal wedge as opposed to a trend continuation wedge pattern.
The lows of last week and the past five weeks remain in a potential support zone and therefore provide some technical reason as to why last week’s low could continue to hold. Regardless, a drop below last week’s low is bearish.
Abu Dhabi
The Abu Dhabi Securities Exchange General Index (ADI) was up by 20.97 or 0.42 per cent last week to end at 4,988.74. There were 17 advancing issues and 12 declining, while volume rose above the prior week and above the 20week volume moving average.
Last week, completed eight weeks that the ADI has been consolidating near highs in a relatively tight range. In general, this is bullish as it is occurring near the highs of the uptrend and it reflects sustained upward pressure by buyers. Selling pressure has not been enough to push price through the bottom of the range. This doesn’t mean the index continues higher but so far that looks to be the most likely scenario.
The consolidation pattern now present is a rectangle trend continuation pattern. It very well could continue to form before a breakout occurs and momentum picks up. Nevertheless, at this point a bullish breakout happens on a decisive rally above 5,039.83 (2018 high), and the breakout into a new 2018 high is confirmed on a daily close above that price level.
Even though the most likely scenario is a move higher, there remains the possibility of a downside breakout and deeper retracement. So far, the retracement off the 2018 peak has been a relatively mild 3.54 per cent. Support at the bottom of the rectangle is 4,859.21. If the ADI falls below that price level and then closes below it on a daily basis, further downside is likely.
Stocks to watch
Eshraq Properties was up 0.05 or 7.9 per cent last week to end at 0.616. The close for the week was the highest since mid-July and signals the possibility that Eshraq is starting to come up out of a 12week bottoming phase.
Last week’s high of 0.63 puts Eshraq right up against resistance of its longterm downtrend line that covers the full 21 month decline. This means that a decisive daily close above last week’s high will trigger a breakout of the falling trend line and a four-month high.
On a monthly basis, the stock has already reached a three-month high and October has a higher low than September. This is additional short-term bullish behaviour that points to a potential turn in sentiment. Near-term support is at last week’s low of 0.5670, followed by the three-week low of 0.5590.