Dubai: The Dubai Financial Market General Index (DFMGI) climbed just 14.75 points last week or 0.80 per cent closing at 1,859.96. Advancing issues led declining by 15 to 10. Volume improved and was the strongest of the past four weeks of the current short term rally.

Higher volume with essentially flat performance for the index could be signalling that the bulls are starting to run out of steam, at least in the short term. However, so far, based on the chart pattern of price the four-week uptrend is still intact.

Near term support is now at 1,826.69, the low of Thursday. A break through that level opens the door to the possibility of more significant profit taking in the short term, in which case a move back towards the 1,759 area is possible. That would be a 38.2 per cent retracement of the uptrend started from the low of February 25.

A move through resistance of 1,887.21, the high of last week, confirms a continuation of the short-term trend. More significant resistance is likely to be found higher at the long term uptrend line and around 1,947 to 1,954.

Abu Dhabi

The Abu Dhabi Securities Exchange General Index (ADI) ended the week down 44.35 or 1.53 per cent closing at 2,859.57. Declining issues lead advancing 21 to 18 while volume increased from the previous week. The week ended with a particularly short-term bearish tone as the ADI dropped 1.68 per cent on Thursday, the biggest decline since December.

The medium-term trend from late January is still in play as long as price stays above the uptrend line (shorter uptrend line on chart), which is where the ADI should find support. The price level of the line will depend upon when the index reaches it.

For now, we can keep an eye on near-term support at around 2,829.57, the low of March 18. If the ADI breaks through and stays below the uptrend line, as well as the 2,829 area, then the chance of a more significant correction increases.

Stocks to watch

More upside might be seen in individual issues but investors must be nimble to not get caught getting in too late. A couple of examples of what can happen are Air Arabia and etisalat. Air Arabia fell 8.57 per cent last week on heavy volume while etisalat declined 13.2 per cent on Thursday alone. Both listings dropped rapidly with large price gaps (change from close to next day's open price) trapping investors with no chance to exit as the decline ensued.

To guard against getting into a stock that has extended itself, let's take a look at some issues that have been trading in defined ranges and have not yet participated in the current rally. They may offer better risk/reward characteristics than those that have already made moves. The price levels noted are important in that they must be broken to signal that more aggressive demand may be coming into the stock.

DFM

Over the past month, Dh1.37 has been identified by the market as resistance for Takaful House. It could see a move up with good risk/reward characteristics if price can break through that resistance.

If Emirates Integrated Telecommunications can break through minor resistance of Dh3.00 with momentum it could see higher prices. This issue has been forming a sideways Symmetrical Triangle consolidation pattern on its chart for the past four months. At some point soon it should start moving again either up or down. If the direction is up then the signal is a move through minor resistance.

Deyaar Development has hit near-term resistance of Dh0.52 twice over the past three weeks after breaking its downtrend line. It may be getting ready to come off the bottom if it can move through and close above Dh0.52.

Upside possible

Green Crescent Insurance has been forming a bottom Head and Shoulders reversal formation on its chart. If this issue can break through resistance at Dh0.92 further upside may be possible, and would signal a change in trend from down to up. A Head and Shoulders bottom reversal chart pattern was seen in Arabtec from January 26 to March 25 before it took off.

Abu Dhabi National Energy Company has formed a Symmetrical Triangle consolidation pattern over the past several months near the bottom of a downtrend. A move through Dh1.31 resistance indicates strengthening and possibility of a rally.

Waha Capital has been range bound over the past several months also forming a Symmetrical Triangle chart pattern. A break through resistance of Dh0.96 should be watched closely as a bullish signal.

Bruce Powers is a financial consultant, trader and educator based in Dubai, he can be reached at bruce@etftrends.net

Disclaimer: Stock market investments are risky and past performance does not guarantee future results. Gulf News does not accept any liability for the results of any action taken on the basis of the above information.