Dubai: The Dubai Financial Market General Index (DFMGI) took off last week, advancing by 77.59 or 2.62 per cent to close at 3,041.72. That’s the biggest one-week move since the beginning of the year. There were 25 advancing issues and 11 declining, while volume dipped to a three-week low.
Strength continues to improve as the index works its way off the 2,870.07 low from five weeks ago. That low ended, at least so far, a 22.1 per cent 28-week decline off the October swing high of 3,684.19. As of last week’s 3,064.60 high, the DFMGI had improved by 6.8 per cent off the recent swing low. That high didn’t quite make it through the next resistance area of 3,066.05, which is weekly resistance from six weeks ago, but the advance did breakout above the four-week high and close above it decisively on a weekly basis. The Relative Strength Index momentum oscillator (RSI) is confirming the improvement in bullish sentiment as it has moved from very oversold to rise back above the 30 oversold level.
Last week’s advance triggered both a bullish breakout of a double bottom trend reversal pattern and a breakout of a long-term trend line resistance. Each is a sign that in the coming weeks and months, the DFMGI has a good chance of continuing its recovery into higher prices.
In the short-term, the index is a little extended on the upside and short-term pullbacks can be used to accumulate stocks aligned with the market index. The double bottom breakout level was at 2,977.63 and that’s one price zone to look for signs of support during weakness. Also, watch the area of support from last week’s low at 2,950.27, followed by the downtrend line and prior weekly support around 2,937.
A decisive move above the six-week high of 3,066.05 triggers the next bullish continuation signal. Then we need to see further follow-through to show the buying pressure is strong enough to keep the advance going.
Higher targets for DFMGI include a potential resistance zone from around 3,195 to 3,264 — the bottom of a prior multi-month consolidation zone. A little higher from there is the next key price zone around 3,326 to 3,359.
The Abu Dhabi Securities Exchange General Index (ADI) rose by 57.54 or 1.25 per cent last week to end at 4,662.58. Market breadth was somewhat even with 19 advancing issues and 16 declining, while volume dropped to a fourteen-week low.
A bullish trend continuation signal was generated on a move above the 4,619.24 trend high from two-weeks ago, and the index closed strong, near the high of the week and at a six-week weekly closing high. Further, the ADI broke above two other potential resistance zones, one from the swing high resistance of 4,651.11 from January 2018, and then the 4,655.81 swing high from April 2017.
Now, the index needs to garner enough upward momentum to break through the next resistance zone that ends around the swing highs of 4,715.05 to 4,721.62, the highest price levels since August 2015. If that happens then a long-term bull trend continuation signal will be generated. At the same time, as the ADI approaches those resistance zones it could again turn back down. So far, this seems to be a likely scenario for the near-term until we see evidence to the contrary.
A daily close below last week’s open of 4,607.44 can be used as a signal that further weakness may be likely. Support should be seen around last week’s low of 4,553.24 and down to the two-week low of 4,536.82. Other price areas to watch for possible support include 4,491 to 4,486.78. Support was seen around there several times during February and March of this year.
Stocks to watch
Market leader Emaar Properties was the fifth best performer in the Dubai market last week, rising 0.34 or 6.5 per cent to end at 5.54. Volume was up but only slightly above the previous week. If the wider market is going to have a chance of continuing to advance, Emaar should participate and preferably lead to way higher.
Last week it reached a five-week high of 5.62 and ended the week at an eight-week closing high, each an additional bullish sign. Emaar broke out of a daily double bottom trend reversal pattern last week on a move above 5.42, and clearly closed the week above the breakout level.
Important support is at the most recent daily swing low of 5.08. If Emaar can stay above that price zone during pullbacks it continues to have a chance of progressing the new developing uptrend. That trend starts at the 4.89 swing low from four weeks ago. However, the closest potential support area is around the double bottom breakout resistance of 5.42.
Emaar Properties has been a laggard in the Dubai market for some time and may continue to be. It is down 20.2 per cent year-to-date and 26.9 per cent over the past year time frame, the bottom 10 performers in Dubai. At the same time, if it continues to show signs of reversal it may again start to lead the market higher. Keep an eye on its relative strength and weakness when compared to other stocks and the DFGMI.
Bruce Powers, CMT, is a technical analyst and global market strategist.