The Dubai Financial Market General Index (DFMGI) dropped by 98.48 or 2.04 per cent last week to close at 4,734.76. Volume rose, but remained in the bottom half of the levels seen the past several months, while most issues participated in the weakness. There were 24 declining issues versus 11 advancing.

The DFMGI continued its consolidation phase, which is now in its third week. Resistance of the consolidation pattern is at 4,935.24 and support at 4,414.13. Until there is a decisive move above that high, or below the low, a continuation of consolidation can be anticipated.

Last week there was an attempt to move above the top of the pattern, but the index found resistance instead at 4,935.08, the high for the week. If there is a decisive move above 4,935.24 the index may be ready to continue higher. It would then be targeting 5,191.50, the swing high from early-June.

On a weekly perspective (weekly chart), we’ve had two weeks of higher lows (low of week is higher than the prior week’s low) and one week of higher highs (high for current week is higher than high of prior week’s range). This represents a slightly upward bias for the index within the price pattern, and resistance has been clearly defined over a three-week period. A rally above resistance should therefore lead to a pick up in upward momentum with an increase in relative volume. If it does not, then that is a warning sign that the move higher may fail.

On the downside, weakness is first indicated below last week’s low of 4,706.04. This would be a sign that consolidation is likely to continue, at least for now. Further weakness from there could reach the consolidation low or support at 4,414.13. If support is not seen from there and is followed by a daily close below that support level, then the probability of a test of the prior 3,730.91 lows increases.

Last week the Abu Dhabi Securities Exchange General Index (ADI) fell by 129.81 or 2.57 per cent to close at 4,925.14. Volume remained near the low for the past year, while market breadth was clearly bearish, with 25 declining issues and only nine advancing.

The ADI was unable to follow through on its bullish close from the prior week, falling each day until Thursday when support was found at 4,897.89. That’s right at support of the 55-day exponential moving average (ema). So far this is minor indication as the index stopped going down but has not yet moved higher in the short-term.

Given the ADI’s previous behaviour in regards to the 55-day ema, when it clearly represented resistance over multiple days approximately a month ago, it could now hold as support (prior resistance becomes support). Certainly, it should be clear quickly as the 55-day ema is now at 4,907.06, just slightly below last week’s close. Even if it is exceeded to the downside there is potential support of some short-term significance around 4,818.

The ADI is now heading into the sixth week of a short-term uptrend, with the high for the trend or resistance at 5,054.95. A decisive rally above that high is needed for a sign of trend continuation. At that point however the index could continue to encounter resistance all the way up to the early-June peak of 5,253.41.

Stocks to watch

Deyaar Properties has been consolidating for the past several weeks, right around the confluence of a couple of moving averages (55 and 100-day emas), representing potential support. Potential, as it remains to be seen whether the shares will go up from here. Strength is first indicated on trade above 1.31, and confirmed above 1.35, which signal a continuation of the short-term uptrend.

Last week the shares closed at 1.24, down 1.59 per cent for the week. The more significant short-term support level is around 1.08.

Ekttitab Holding has been consolidating at the bottom of its downtrend for the past two-months or so, even as the wider market has strengthened. Although this reflects relative weakness, there are signs that a bottom trend reversal may be getting close to triggering. Last week the shares ended higher by 4.50 per cent at 0.65.

An upside breakout, which could lead to higher prices, is indicated on trade above 0.695. That would also put the shares back above resistance represented by the 55-day ema for the first time since early-April. Based on the bottoming pattern, a minimum target around 0.83 is indicated.

The daily chart of Hits Telecom also looks to be forming a bottom trend reversal pattern. In this case, the pattern is an inverse head and shoulders, a classic trend reversal pattern in technical analysis. A bullish breakout is first indicated on a decisive rally above 0.67, and further confirmed on a daily close above 0.70. That would put the shares back above the 100-day ema for the first time since mid-March, and provide an additional for of strength for the shares. Based on the pattern, a minimum target of 0.78 is indicated.

Bruce Powers, CMT, is a financial consultant, trader and educator based in Dubai, he can be reached at bruce@etf-portfolios.com