The Dubai Financial Market General Index (DFMGI) fell by 41.00 or 1.30 per cent last week to end at 3,108.53. There were nine advancing issues and 30 declining, while volume jumped to an eight-week high.
The DFMGI fell below the prior week’s low of 3,134.12 thereby triggering a bearish trend continuation. Since the week closed below that prior low the bear signal was confirmed. This improves the odds that the index could at least reach the next key Fibonacci support level of 61.8 per cent at 3,029.09. That price level is followed closely by the December 2014 spike low support at 2,992.53. Together, these two price levels create a probable zone of support.
There is also a minor potential support level around last week’s low of 3,081.27 derived from more advanced Fibonacci ratio analysis, the details of which are too complex to go into here. Suffice it to say that if last week’s high of 3,148.53 is broken to the upside and there is a daily close above it, a further bounce from there is likely. Fibonacci ratio analysis is used to find potential support levels mathematically relative to the prior trend, which is this case was up. Note, that only once in the past 10 week’s has the DFMGI moved above the prior week’s high and that was two weeks ago. Regardless, Therefore, a daily close above a prior week’s high would be a clear change in the pattern impacting the short-term.
When looking at the daily chart we can already see some signs of short-term strength as Thursday was an up day and the high of the day was above the prior two days, which had been down. Plus, it was the only positive day for the week.
Last week the Abu Dhabi Securities Exchange General Index (ADI) was up slightly by 7.56 or 0.17 per cent to end at 4,585.40. Market breadth was close to even with 12 advancing issues and 14 declining, while volume spiked to a 13-week high. That’s the highest volume since the early part of the most recent 9.6 per cent upswing from the December lows.
Volatility and confusion was high as the index moved within a relatively wide range with a top of 4,658.21 and a low of 4,486.78 — an approximate 3.8 per cent range. The move to the high earlier in the week triggered a bullish breakout of the uptrend as the index went above the prior swing high of 4,651.11 from late-January.
Nevertheless, the new high breakout didn’t last long and quickly failed. Subsequently, the DFMGI sold off to below 12-week support early Thursday. This drop also didn’t last long and the index subsequently rallied into the close to end at the high of the day. For the week the index closed near its opening price for the week. On a weekly basis then the open and to close range was narrow reflecting investor uncertainty, while the wide range for the period relative to prior highs and lows, was also an exhibition of investor uncertainty. First the bulls took the DFMGI to new highs and then the bears dropped it below key support, before recovering to end approximately where we started at the beginning of the week. Given that the week was up nevertheless, we can say there is a very slight upward bias.
At the end of the day last week’s behaviour doesn’t change much as the ADI remains within a price range near the top of a developing uptrend. A downtrend line was broken in late-2017 and during the past 10-weeks or so of consolidation the line has been tested as support several times, including last week, and has held or turned back the index each time. This is bullish behaviour and the ADI therefore is indicating it wants to go higher. But, that is not clear until we see a daily close above last week’s high of 4,658.21.
From last week’s low of 4,486.78 and up to approximately 4,499 is a zone of support for the recent consolidation pattern. A daily close below the bottom of the pattern, last week’s low, will be bearish.
Stocks to watch
Dana Gas was the strongest performer in the Abu Dhabi market last week, rising 0.08 or 9.5 per cent to close at 0.92. Strong stocks have a tendency to stay strong. We see that characteristic with Dana Gas as it is the top performer in the Abu Dhabi market on both a one-year and three-year basis. Last week the stock broke out to a new trend high as it rallied above the prior peak of 0.85 with conviction, closing in the top third of the week’s range. Strong volume accompanied the move as the stock rose to thirteen-week high.
In the short-term Dana Gas is extended but it can be watched during pullbacks for a new entry zone. The stock remains in an uptrend which started at the 0.38 low in May 2017. The breakout zone and last week’s low of 0.85 is one price area to watch for support. Further down around 0.79 to 0.77 is a short-term trend line support zone. Given the recent historically strong performance another strong move could ensue following a pullback.
— Bruce Powers, CMT, is a technical analyst and global market strategist.