Dubai: The Dubai Financial Market General Index (DFMGI) gained 68.95 or 1.91 per cent last week to end at 3,675.12, its fifth consecutive week of gains. Strength seen in the index was not spread across the wider market as there were 15 advancing issues and 22 declining. Meanwhile, volume dipped to a four-week low.

With last week’s performance the odds for an eventual breakout above the 2017 high of 3,738.69 have improved further. As of last week’s close the index is only 1.7 per cent below the 2017 high of 3,738.69. The DFMGI exceeded the high of the last potential resistance zone identified previously as 3,604.70 to 3,658.31 last week, and it ended the week above it.

Next, the index needs to contend with potential resistance from prior consolidation going up to the 2017 high. Keep in mind that we’ve just had a five-week rally in the DFMGI and therefore upward momentum started to increase at the beginning of that trend and could get tired soon. From the most recent swing low of 3,264.36 the index has gained as much as 12.7 per cent, as of last week’s 3,680.44 high.

Will the index have enough strength to keep going if it breaks out above the 2017 high before some degree of retracement or consolidation? So far we’ve seen strength as last week’s potential resistance zone was exceeded and the index closed near the high for the week. But, history would suggest that maintaining upward momentum following a breakout to new 2017 highs is suspect. It would be healthier for the current advance to rest for one, two or three weeks, and then make a run to exceed the 2017 high. The DFMGI would then have a better chance of continuing higher subsequent to the breakout.

Regardless, if that high is exceeded on a daily closing basis a long-term bullish trend continuation signal will be generated. Since hitting a low in January 2016 the DFMGI has been progressing higher forming a classic continuation of an uptrend with a series of higher swing highs and higher swing lows. Following this breakout scenario the DFMGI would first be heading towards a potential monthly resistance zone from around 3,884 to 3,922. Subsequently, the next target resistance zone looks to be around the 2015 highs of 4,234 to 4,253.

Last week’s low of 3,597.26 is near-term support. As long as we stay above the support zone the five-week uptrend remainst intact. If it is exceeded to the downside then the more obvious potential support zones are first at 3,573, followed by 3,523, and then 3,465.

Abu Dhabi

Last week the Abu Dhabi Securities Exchange General Index (ADI) was up 27.75 or 0.61 per cent to close at 4,596.03. There were 20 advancing issues and nine declining, while volume dropped to a five-week low.

The ADI is showing signs it wants to continue higher as we saw another move above the downtrend line. Last week the index reached a high of 4,608.64. The rally triggered a bullish continuation for the four-week uptrend, put the index above the 4,596.26 swing high from three weeks ago, and left it back above downtrend line that starts from the 2017 high. Further, the week ended above the long-term uptrend line and at a 12-week closing high. Each of these readings are bullish signs for the near-term outlook.

As discussed in previous week’s the ADI has been progressing in a wide ranging descending trend channel ever since hitting the 2017 high at 4,715.05 in January. A daily close above last week’s high gives the next bullish signal as it solidifies the breakout above the downtrend line and breakout of the descending trend channel. On the way to the 2017 high the ADI has a couple of possible minor resistance areas to deal with including the first around 4,655.81, followed by 4,668.77.

Near-term support is at last week’s low of 4,550.96, followed by the two-week low at 4,503.52.

Air Arabia continues to strengthen off the 0.956 bottom hit 10 weeks ago. Last week the stock was up 4.07 per cent to close at 1.11, the high of the week. Volume spiked to a 12-week high on the advance. A bullish trend continuation signal was given as Air Arabia rallied above the prior week’s 1.08 high.

The target zone is relatively close around 1.14. That’s where a 38.2 per cent Fibonacci retracement of the decline off the January high will be completed. After that the next higher target zone would be around the 50 per cent retracement at 1.20. Support is near the most recent swing low from the daily chart at 1.05.

Dubai Investments had its highest weekly close in two years ending the week up 5.0 per cent to 2.53. It was the fourth best performer in Dubai. Weekly volume spiked to an eight-month high. The breakout is bullish for the intermediate-term but the stock is getting extended in the short-term. It deserves to be watched for a new set-up following a retracement.

If the current leg up in the uptrend, measured from 1.99 low hit nine weeks ago, matches the appreciation in the prior leg up, then Dubai Investments should 2.69 eventually, at a minimum.

Bruce Powers, CMT, is chief technical analyst at www.MarketsToday.net.