Over the past several months the chart of Emirate Telecommunication Corp. (Etisalat) has been showing signs of a long-term trend reversal, from down to up. After reaching a high of Dh12.00 in October 2010 the stock started a long decline that took it down to as low as Dh8.50 in mid-January. After a short-lived rally the stock declined before again finding support at Dh8.50, thereby creating a potential double bottom reversal pattern.
An upside breakout of that pattern, above Dh9.85, occurred in June with the stock getting as high as Dh10.05 before selling off again. On that decline support was found at a higher price level of Dh9.01. The Dh10.05 swing high and Dh9.01 swing low were the beginnings of an uptrend which has recently given signs of continuing higher.
Etisalat closed above its two-year downtrend line in mid-September and has since rallied to a 13-month high. This signalled a bullish continuation of the breakout of the double bottom pattern. Additional bullish confirmation is seen in the 200 daily exponential moving average which has turned up.
The next target for Etisalat is between Dh10.56 and Dh10.66, where the second leg up off the bottom matches the price appreciation of the first leg, and the 61.8 per cent Fibonacci retracement of the two-year downtrend, respectively. Given the bullish analysis above a higher target from approximately Dh11.20 to Dh11.25 also has a very good chance of being reached. Important support is now at Dh9.67.
