EmiratesNBD: A view from the top

EmiratesNBD recently hit a potentially strong resistance level which could keep it from advancing for a while. Two weeks ago the stock hit a high of Dh4.20 thereby marking a 58.5 per cent advance off the July 2012 low of Dh2.60. That peak also completed a 78.6 per cent Fibonacci retracement of the prior decline from the June 2011 peak of Dh4.63, an important milestone. In addition that week ended with a bearish engulfing candlestick pattern being formed on the weekly chart, a specific pattern with short-term bearish implications.

As with most of the Dubai market, upward price momentum accelerated in the early part of January with EmiratesNBD gaining a maximum of 51.1 per cent so far this year. There has been no retracement to speak of during the rally and momentum has been slowing since mid-February, even as price continued higher. The long-term implications of 2013’s strong performance are bullish, but in the short-term the stock has gotten over extended.

Given the above analysis the probability for a correction is the highest it’s been all year. Even if Dh4.20 can be exceeded in the near-term the odds that the stock will keep going much further from there are relatively low.

We could now see choppy sideways trading for a while or a decline. A wide support zone lies from around 3.80 down to 3.64. Trade below that zone will see the stock next target the 3.40 price area.

On the upside 4.38, followed by 4.63 are the two price areas to watch for resistance.