Dubai

Last week the Dubai Financial Market General Index (DFMGI) gained 136.27 or 4.01 per cent to end at 3,537.42, the highest weekly closing price in fourteen weeks. This was the strongest one-week performance this year! There were only six stocks down against 32 advancing, while volume reached a three-week high.

Other bullish indications include a breakout above the prior 3,465.38 trend high and a weekly close in the top quarter of the week’s range. Also, a breakout above the 200-day exponential moving average (ema), an indicator for the long-term trend, occurred last week.

Although further progress is needed, the odds are improving for an eventual test of resistance around this year’s 3,738.69 high and possibly a breakout above it. First though, the DFMGI needs to exceed the next potential resistance zone, which looks to be around 3,572.10 to 3,573.25. That price zone consists of the completion of a measured move and prior resistance from June, respectively. The measured move price pattern is where the price appreciation of the second leg up off the June low matches the advance in the first leg up.

During 2016 there were three rallies that ended within a price zone from 3,604.70 to 3,658.61. This means that if the June swing high is exceeded the DFMGI will quickly hit this second resistance zone and could then either stall or pull back. However, if the index breaks out above that zone the chance for an eventual move above the prior 2017 peak improves.

As discussed in this column before, the overall long-term developing pattern in the DFMGI is bullish. A breakout of the long-term downtrend line occurred last month, a test of the line as support completed two weeks ago with price subsequently moving higher, and a bull trend conintuation signal was generated last week. Each indication strengthens the case for a continuation higher. Further, as of the low seven weeks ago we continue to have higher swing highs and higher swing lows in the structure of the long-term uptrend, begun in January 2016. This indicates that the uptrend remains intact and therefore the odds continue to favour an eventual resolution higher.

On the downside, support is around the lows of the past five weeks, with the lowest price at 3,371.

Abu Dhabi

The Abu Dhabi Securities Exchange General Index (ADI) jumped 121.72 or 2.77 per cent last week to close at 4,518.07, its strongest performance in 14 weeks. There were 22 advancing issues and 10 declining, while volume fell from the prior week.

For most of the week the index went sideways in a narrow range until breaking out of the range Thursday and spiking higher. Regardless, the index remains well below its long-term uptrend line, one representative of resistance, and is heading up into a range of other potential resistance zones based on prior price action. Last week’s high was 4,518.07.

The next price level of note worth watching is the most recent swing high of 4,553.31. If the ADI can eventually close above that price level on a daily basis, the odds improve for a continuation higher. The next higher potential resistance zone would then be from around the 4,627.77 May peak to the 4,668.77 February peak. If there is a daily close above the 4,554.31 high the odds improve for an eventual test of the 2017 high at 4,715.05. Until then the chance that the rally will hit resistance strong enough to turn it back down remains.

Minor support is at last Thursday’s low of 4,410.45, with more significant support at the 4,358.36 low from two weeks ago. Although too early to say with confidence, that low may have completed the correction that began off the January highs. At the low the ADI was 7.6 per cent below the 2017 high.

Stocks to watch

Dubai Investments was up 5.69 per cent last week to close at 2.23. What’s notable is that last week’s advance triggered a breakout of a head and shoulders bottom trend reversal pattern. The trigger occurred on Thursday’s decisive rally above 2.19. It was accompanied by a spike in volume to a 32-day high thereby confirming strength of the breakout. The stock closed strong, near the week’s high of 2.24.

Short-term weakness will likely see buying pressure pick up as support is tested around previous resistance (top zone of bottoming pattern) from around 2.20 to 2.18. The bullish pattern remains in play unless there is a daily close below 2.08.

Emaar Properties is looking like it has completed a short-term retracement and is now in the early stages of another move higher. Last week the stock was up 2.19 per cent to close at 7.94. Emaar broke out of a multi-month rectangle base five weeks ago. Subsequently, it hit resistance at 8.08, a two-year plus high, and moved into a retracement. Support was found at 7.72 three weeks ago and tested each of the subsequent two weeks. That support happens to be at the top of the rectangle (prior resistance becomes support).

Last week Emaar broke out above the prior two week highs of 7.93 and closed above it. The high for last week was 8.00. This type of price behaviour is constructive and very bullish for the long-term up trend. Next, watch for the a new bullish signal on a move above 8.08.

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