Dubai: Last week the Dubai Financial Market General Index (DFMGI) rallied 193.32 or 5.26 per cent to close at 3,867.61. Most issues gained, with 26 advancing and only eight declining, while volume reached a three-week high, and the fourth highest level of the past six months.

The DFMGI closed above the prior week’s high of 3,801.58, a short-term bullish sign. Next watch for a decisive daily close above last week’s high to provide the next bullish signal, with the index then heading towards the most recent swing high of 4,008.38. A daily close above that swing high triggers a bullish trend continuation of the rally that began off the 2,992.53 corrective low around mid-December. If this occurs then the DFMGI has a good chance of rising to at least the bottom of a potential resistance zone that starts around 4,231.12.

That’s the bottom or support of a six-week consolidation phase that took the form of a symmetrical triangle pattern back in October/November 2014, and part of a larger multi month symmetrical triangle formation. This larger pattern turned out to be a top, putting an end to the rally that began from the June 2012 swing low. Once the DFMGI broke down from that pattern at the end of November 2014, it rapidly fell before finding support at 2,992.51.

The top of the smaller triangle is at 4,727.97. Therefore, resistance that may be strong enough to turn the index back down, could be seen anywhere from 4,231.12 up to 4,727.97. There are at least two prior support levels within the triangle’s range that can also be watched for resistance. The first is around 4,385, and the second in the area of 4,221. Also, as discussed in recent weeks, the second leg up off the December low, starting from 3,359, matches the appreciation of the first leg up, at 4,378.80. Note that this price is very close to 4,385 and therefore, creates a resistance range from around 4,378.80 to 4,385.

Support is at last week’s low of 3,637.40, followed by a potential support range from around 3,427 to 3,358. As long as the DFMGI holds above last week’s low for now, the odds favour a continuation higher.

Abu Dhabi

The Abu Dhabi Securities Exchange General Index (ADI) was flat last week, up only 2.6 or 0.06 per cent to close at 4,481.36. Volume was slightly below the prior week. In addition to the index not progressing from the prior week, there was a balance between advancing and declining issues, with 18 advancing and 16 declining, reflecting investor uncertainty as to the next direction.

Last week the ADI managed to get above the prior week’s high of 4,516.45, but did not close above it. The high for the week was 4,553.45.

Two weeks ago the pull back from that high found support at 4,295.57, with the index bouncing from there. Given the behaviour since we should see a daily close above the recent swing high of 4,605.72 before there is much confidence that the ADI can go higher. Until then the possibility for a deeper pull back from that swing high is possible. A break below 4,295.57 would lead to a lower test of the corrective low from December 2014. During that correction the ADI found support at 3,876.44.

If the recent swing high is exceeded the ADI will be heading up into a resistance zone starting from around 4,688 and up to 5,004. That zone comes from a six-week consolidation period from October/November 2014, and is also the bottom of a large symmetrical triangle consolidation topping pattern. Another specific price area for resistance within the zone is around 4,790.

Stocks to watch

A potential bullish double bottom trend reversal pattern has formed in the chart of Emaar Properties. Emaar continues to come off the bottom of 5.90 hit five weeks ago. The high of the first rally or first leg up of the double bottom hit resistance at 7.98 three weeks ago. Last week, the second leg up (coming off the recent 6.28 swing low), tested that price area as resistance, reaching a high of 7.96 for the week.

Emaar completed the week up 10.79 per cent, closing in the top quarter of its weekly range at 7.70. Volume was supportive of the price ascent as it rose to a three-week high.

The breakout of the double bottom happens on trade above 7.98, and is confirmed on a daily close above that price level. Ideally, the breakout is accompanied by a clear pickup in volume. This provides greater confidence that the move has the potential to keep going higher.

We can arrive at a possible minimum target by taking the price distance from the 7.98 high to the lower bottom of 5.90, or 2.08, and adding it to the breakout price level of 7.98. In this case we arrive at a target of around 10.06. Another area to watch for resistance is starting around 9.69. That’s where the stock found support in the past, and it could now turn into resistance on the way back up.

 

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