Abu Dhabi makes highest close in four years, while Dubai holds support

Dubai: The Dubai Financial Market General Index (DFMGI) gained 24.37 or 0.87 per cent last week to end at 2,840.16. There were 16 advancing issues and 23 declining, while volume was near the lower levels of the year.

August ended in the lower half of the month’s range, which reflects continued downward pressure.

And, an outside monthly candle occurred, where the high to low range of August was larger than July on both the upside and downside. Unfortunately, this further shows the uncertainty currently prevalent in the market as the DFMGI consolidates around a low.

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Three weeks ago the index broke below the prior trend low of 2,805.44 from June and closed below it on a weekly basis. By itself this is a bearish signal indicating that the downtrend is likely continuing.

However, the low of that new low week, 2,795.96, has continued to hold as support during the subsequent two weeks and no new low of the trend has occurred.

The low last week was 2,796.83, and the week before, 2,802.53 (week had only one trading day due to holiday). As of the 2,795.96 low the index had corrected by 24.11 per cent from the October 2017 peak.

Last week a short-term bullish counter trend bounce took place as the DFMGI closed above the prior week’s high on a weekly basis. This should lead to more of a bounce in the short-term.

A move above last week’s high of 2,853.76 gives the next sign of strength with the subsequent weekly resistance area around the three-week high of 2,922.40. That’s followed by the most recent swing high of 2,986.35. It’s a key pivot level to watch as it forms the price structure of lower swing highs and lower swing lows that make-up the current downtrend.

If we see an eventual daily close above the most recent swing high, then positive sentiment should improve and the likelihood of a bullish reversal of the current downtrend follows. It’s been 10 months for the current decline since the 2008 sell-off. This by itself improves the chance for a recovery in the foreseeable future.

Abu Dhabi

The Abu Dhabi Securities Exchange General Index (ADXGI) had its strongest performance in 14 weeks, rising 101.96 or 2.09 per cent to close at 4,986.88. Market breadth was even, with 16 advancing and declining issues, while volume was near the lows of the year.

On a monthly basis, the index ended August at its highest monthly closing price since September 2014, and in the top half of the months range. Much of the 2.6 per cent monthly advance occurred last week.

A test of the 2014 resistance zone has begun with the ADXGI now only 5.4 per cent away from its 5,255.35 peak. The next monthly resistance possibility is around the October 2014 high of 5,140.26.

Since the most recent swing low of 4,494.02 in June, the index has been rising and looks to continue higher. Key near-term support is at last week’s low of 4,885.23.

Just be careful in the very short-term as last Thursday the ADI closed weak, in the lower half of the days range, after spiking into new highs for the uptrend. We therefore could see some short-term profit taking as the index pulls back some.

Stocks to watch

Dana Gas continues to trade near nine year highs and approaches its record high of 1.20, set in 2009.

There are a number of factors pointing to this stock going higher. Whether it does that in the near-term or first sees a pullback, remains to be seen.

Dana Gas has been one of the strongest performers in the Abu Dhabi market both year-to-date and over the past year, rising 37.04 per cent (third strongest) and 73.44 per cent (second best), respectively.

In May Dana Gas broke out above 1.04, a multi-year peak and it has been consolidating mostly above that pivot level since. Over the past six months the stock has advanced with a series of higher monthly lows.

Last month a new high for the uptrend was reached as Dana Gas broke out of a three-month range, although only by one fil. Further, the close for the month of August was the highest monthly close since September 2008, 10 years ago.

Dana Gas was up 1.77 per cent last week to close at 1.11. Near-term support is at 1.08. That price level was support recently over three weeks, so a drop below it will likely lead to further weakening or consolidation.

The more significant price support zone is around the most recent swing low of 0.98. That swing low is part of a series of higher swing highs and higher swing lows that define the uptrend. A drop below it would be a clear sign of weakening, which could take weeks or months to recover.

On the upside, we need to see a decisive rally above the recent 1.16 swing high to signal a breakout and therefore a bullish trend continuation.

At that point Dana Gas next targets the 2009 peak at 1.20, with the possibility it will exceed that objective. Ideally, the break-out is accompanied by an increase in volume.

Bruce Powers, CMT, is a technical analyst and global market strategist.