Dubai: The Dubai Financial Market General Index (DFMGI) gained 237.61 or 5.42 per cent last week to close at 4,618.28, a new weekly closing high for the uptrend. Market breadth supported strength in the up move with 26 advancing issues versus 10 declining, and volume improved to a seven-week high.

That’s the highest weekly close for the index since early-September 2008, just prior to a waterfall decline over the subsequent four to five months as the financial crisis hit global equity markets. In other words, the DFMGI has recovered almost all of the losses from the wave of selling that started in early-September 2008. Lehman Brothers declared bankruptcy on September 15 of that year causing global panic among investors.

For 2014, the DFMGI retains its top position among equity markets globally, having advanced 37.05 per cent to date. Last week the index exceeded two potential resistance zones without a problem, a testament to its strength. The 61.8 per cent Fibonacci retracement (4,397) of the long-term internal downtrend, as measured from the mid-January 2008 peak of 6,314.98, was exceeded. Also, the index plowed through prior resistance from several months in 2007, around 4,566.80.

The next potential resistance zone of any note looks to be around 4,787, previous resistance on a monthly basis. That price level is followed by the 50 per cent retracement of the full long-term downtrend begun from the 2005 high of 8,544.67.

Over the past three months as the DFMGI has continued higher while monthly volume has been falling, a sign of dissipating enthusiasm from investors. However, that’s a longer term indicator while the near-term remains bullish. As long as the low from last week at 4,380.67 is not exceeded on the downside, the uptrend on a weekly basis remains secure.

Abu Dhabi

Last week the Abu Dhabi Securities Exchange General Index (ADI) advanced by 68.37 or 1.41 per cent to close at 4,923.47. Volume declined slightly from the prior week but remained relatively healthy, while advancing issues topped declining at 29 to 22, respectively. The ADI has risen 6.1 per cent since bouncing off the February bottom at 4,639.78.

The weekly close reached a four-week high, following a greater advance earlier in the week. Resistance was seen on a daily basis in the consolidation zone around the February peak. That peak of 5,004.34 needs to be exceeded to the upside for the next important bullish signal. Until then the ADI remains at risk of a relatively mild advance when compared to the DFMGI, another drop, or a choppy sideways period.

A bullish continuation signal is given on a daily close above the peak. It looks like there a chance the ADI will be able to get above it over the coming one to three weeks as it is now only 1.64 per cent away.

In that case the next target for the index would be around 5,158.56, the peak from June 2008. A daily close above that peak with be an important milestone in the ADI’s recovery from the 2008 financial crisis. Following July 2008 the ADI fell hard for six straight months losing 58.7 per cent of its value.

Support is at last week’s low of 4,859.27. If exceeded on the downside, the next weekly low around is 4,773.91 is where support might next be seen.

Stocks to watch

Abu Dhabi Commercial Bank broke out to new highs last week, gaining 7.99 per cent for the week and ending at 7.70. That’s the highest weekly closing price for the stock since early-April 2006, and confirms a continuation of the uptrend. The breakout follows a three-month consolidation phase and signals the beginning of what could be another wave of buying.

Retracements down towards the breakout level, around 7.37, will likely be met by investors looking to enter to take advantage of what is likely to be a new move higher for the stock. Support is at last week’s low of 7.15. A drop below that price puts near-term upside at risk of failure.

The next target for the stock is around 8.06, with a good chance it could exceeded, in which case the next target would be around 8.87, prior monthly resistance from the first half of 2005.

A similar upside breakout occurred in EmiratesNBD last week. It has been consolidating sideways for the past couple of months before trading above 8.60, the high of that resistance zone. The stock rallied 9.09 per cent to close at 9.00. Volume reached a three-week high and more than doubled over the prior week, giving bullish confirmation of price behaviour.

EmiratesNBD is next heading into a potential resistance zone starting around 9.45 and up to 12.17. That price range was where the stock traded for ten months just after it became listed in 2007. The low of the price zone was support back then, but now it is where potential resistance begins. It is interesting to note that a 61.8 per cent Fibonacci retracement of the prior long-term completes at 9.47.

Last week’s low of 8.16 is important support, followed by 7.80. However, pullbacks down towards support of the consolidation zone at 8.60 will likely see more aggressive buyers holding up the stock.

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