The Dubai Financial Market General Index (DFMGI) gained 48.89 or 2.30 per cent last week to close at 2,177.68, a new weekly closing high for the current rally. Volume was again stronger than the previous week, reaching it highest weekly level in at least three years. That’s a bullish sign and confirms the strength seen in prices. Most of the market participated in the gains with 26 advancing issues and only eight declining.

Last week the DFMGI ended strong as it closed above the prior week’s high. It is now up 37 per cent year-to-date. The index continues to target the next resistance zone from approximately 2,201 to 2,207. That zone held the market on several occasions back in 2009 and could very well do so again. Once that level is cleared on the upside the DFMGI then targets 2,409.

Near-term support is at 2,128.64, last week’s low. A daily close below that level will likely lead to more selling pressure and a steeper fall. The next support area would then be around 2,075.56, also a weekly low, followed by a support zone from 1,989.62 to 1,941.

 

Abu Dhabi

After a one-week pause late last month the Abu Dhabi Securities Exchange General Index (ADI) continued its ascent last week climbing 89.03 or 2.71 per cent to close at 3,369.21. Although volume remained strong, near the highs of the past several years, it was only up slightly from the prior week. Market breadth was widespread with 31 advancing issues and nine declining. For the year the ADI has advanced 28.3 per cent.

The index is now fast approaching the next resistance zone from 3,395.37 to 3,425.85. Above there is 3,448.46, followed by another price zone from 3,551.94 to 3,577.74. These are all potentially significant resistance zones, determined from prior support or resistance levels from the historical monthly chart. Support and resistance levels determined from a monthly chart is assumed to carry more weight than price levels viewed on a weekly or daily chart. In addition, two of the resistance zones mentioned above have been indicated on multiple months, thereby further adding to their potential significance.

In technical analysis there are two things which make the identification of support or resistance more significant. First, the longer the time frame, in this case monthly (each period or bar represents the price action within a month), and the second is the number of times similar areas of price have seen support or resistance in the past. The more times a price level has held or turned a market, the more significant.

These levels noted above should therefore be watched carefully as an area where the market might turn over. Alternatively, a breakout higher would be a very bullish signal for the longer-term. In the short-term however we also need to consider that the ADI has been rallying for six weeks and would probably need a little time to consolidate recent gains or retrace a bit before sustainable buying strength would be strong enough to propel it above the first zone.

Further to the above, a measured move is completed within the first zone at 3,422.23, thereby providing another piece of evidence to support the probability of seeing resistance in that area. That target price is where the current rally swing off the March low of 2,935.61 matches the price distance seen in the prior rally off the December low of 2,582.58.

Weekly support is at last week’s low of 3,300.58, followed by 3,231. A daily drop below the first price increases the odds that the ADI will fall to at least the next level if not further. The last prior resistance of any significance below there was at 3,140.13, which could now be support on the way down.

Bruce Powers, CMT, is a financial consultant, trader and educator based in Dubai, he can be reached at bruce@etf-portfolios.com