The Dubai Financial Market General Index (DFMGI) has once again hit a new high for the uptrend, closing at 2,700.8, up 68.1 or 2.59 per cent. This occurred on a surge in volume to the fifth highest level in at least three years. Strength was widespread with 22 advancing issues and only eight declining.

The DFMGI exited a short two-week consolidation phase that included a shallow 2.7 per cent retracement. This is a sign of underlying strength confirmed by the subsequent move to a new high on improving volume. If sentiment was shifting to short-term bearish sellers would have been move aggressive and driven the index down further before a rally.

There is a potential resistance zone from approximately 2,712 to 2,752. But with the short-term uptrend remaining strong there’s a chance the DFGMI will surpass that zone before a slowdown. The next target would then be around 2,870, prior monthly support. However, the more significant potential resistance zone is higher still.

Last week in this column it was discussed that each of the three prior major advances in the DFMGI, since finding a bottom in January 2012, have been 37.4 per cent. That’s a pattern that could occur again in the current advance, which has gained 23.8 per cent so far, putting the index at 2,998.9. That price area is given more weight as a target in that the 100 monthly exponential moving average (ema) is close by at 2,954.83, and in the area of resistance represented by the long-term downtrend line drawn off the 2005 peak.

On the downside, weekly support is around 2,608.63, followed by 2,491.18.

Abu Dhabi

Last week the Abu Dhabi Securities Exchange General Index (ADI) gained 59.07 or 1.52 per cent to close at 3,941.25. Technically that is a new high but just barely. The prior high was 3,941.23. Regardless, this is bullish price action improving the chance for further upside. Volume was weak however, near the low end of its range for the 2013 advance. At the same time market breadth shows supporting strength with 26 advancing and 14 declining issues.

A daily close confirms strength with the next target then around 3,956 to 4,001.56, prior monthly resistance and the 61.8 per cent Fibonacci retracement of the internal long-term downtrend, respectively.

Weekly support is around 3,824.48, followed by 3,704.26.

Stocks to watch

There are now a number of bullish consolidation chart patterns starting to show up, especially in Dubai.

Arabtec gained 9.05 per cent last week on very high volume and ended at 2.65. This was the second highest volume week in at least three years. What’s significant is that the stock closed above its most recent peak of 2.58, thereby signalling a continuation of the uptrend begun from the March 2011 low. The next target is around 3.06 to 3.11.

Gulf General Investments is showing signs of continuation from a breakout of a bullish flag pattern a month ago. The stock needs to hold above support of 0.514 to maintain its upward bias. Another bullish signal is given on trade above 0.624. Last week the stock closed at 0.54, up 8.15 per cent. Trade below 0.49 is a sign of weakening.

For the past four months Islamic Arab Insurance has been forming a symmetrical triangle pattern. Last week the stock was up 7.58 per cent to close at 0.71, with volume at an eleven-week high. A decisive close above last week’s high of 0.718 signals an upside breakout, with further confirmation of strength seen above 0.739. The top of the triangle at 0.78 would then be the next target. But, based on the size of the pattern a potential target around 0.93 is indicated if a breakout is confirmed.

Bullish pennant

Sharjah Islamic Bank has been forming a small symmetrical triangle, also referred to as a bullish pennant, ever since reaching resistance at 1.70 in early-June. That high was preceded by an 88.9 per cent advance. An upside breakout is triggered above 1.59 with a minimum target of around 2.25. If the pattern is to remain valid there should be a breakout within the next week or two at the most. Otherwise a failure is likely noted by a decline below 1.42.

Shuaa Capital has formed a bullish ascending triangle pattern on its chart with a breakout above 0.80. The next target would then be around 1.00. This pattern may need a little more time before a breakout occurs but deserves to be watched. An upside breakout becomes less likely on trade below 0.70.

Finally, there is Union Properties, the biggest gainer in the UAE last week, up 30.84 per cent to close at 0.54, a price last seen in March 2010. That move confirms an upside breakout of a 17-month consolidation phase that followed a 123 per cent gain. The next potential resistance zone begins around 0.71. Support is around 0.41.

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