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Abu Dhabi shows early signs of turning while Dubai maintains signs of upward pressure

DIB, DFM among stocks to watch

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The Dubai Financial Market General Index (DFMGI) was up 12.92 or 0.35 per cent last week to end at 3,657.23. Market breadth was relatively even with 15 advancing issues and 18 declining, while volume improved to a six-week high (two of those weeks were four days each).

We did see a continuation of the four-week uptrend last week as the prior week’s high of 3,617.64 was exceeded and the week ended above that high. Last week’s high was 3,667.42 and a move above there will give the next bullish signal with a daily close above that high confirming further strength.

The next key higher price area to watch is around the most recent swing high of 3,681.11. That high needs to be exceeded to trigger the next bullish signal for the intermediate-term 14-week uptrend. If it does trigger then the DFMGI is next heading towards the 2017 high of 3,738.69.

If instead of further bullish behaviour signs of resistance are seen, we could see consolidation or a turn back down and a continuation of the correction that started off the high six weeks ago. A drop below last week’s low of 3,630.36 is showing weakness and could lead to further declines. It wouldn’t be surprising to see another drop given the rising wedge type characteristics of the recent four-week rally.

The key support level on the downside is the five-week low of 3,560.04. That’s where support was seen following the initial or first leg down off the recent swing high. If the DFMGI drops below there then it is likely heading first to the 3,465 support area, or further down to the 3,371 price zone.

Abu Dhabi

Last week the Abu Dhabi Securities Exchange General Index (ADI) advanced by 27.48 or 0.62 per cent to close at 4,481.19, its strongest performance in at least six weeks. There were 14 advancing issues and 19 declining, while volume fell below the prior week’s level.

Although the ADI initially triggered a bearish trend continuation signal earlier in the week on a drop below 4,450.40 support (current bear trend low), by the end of the week it had reversed to close near the high for the week and at a seven-day high. This type of price behaviour points to further upside in the near-term.

At the same time the index is sitting inside a four-week consolidation zone. It needs to breakout above that zone to provide confidence it can keep going. Resistance of the price zone is around the two-week high of 4,508.47. Further up is a potential resistance zone around 4,563, followed by the most recent peak at 4,608.92.

The ADI remains inside a multi-month consolidation range that has developed since the beginning of the year. A daily close above the recent peak of 4,608.92 would be the first sign that the index may be getting ready to move out of the consolidation phase and trend again.

Last week’s low of 4,426.01 is near-term support. Below there is the significant support zone of 4,358 to 4,355. That support zone was identified by the market on two separate occasions this year and should therefore be respected.

Stocks to watch

Dubai Islamic Bank looks to be getting close to triggering a bullish trend continuation of the 27-week uptrend. Last week the stock was up 0.81 per cent on six-week high volume to end at 6.19. An upside breakout and bull trend continuation signal is generated on a decisive rally above the most recent 6.20 swing high.

Following such a breakout the next key price level that will need to be exceeded is the 6.29 (2017 high) swing high from February. A decisive breakout above that price level and subsequent daily close above it will signal a bullish continuation of the larger 20-month uptrend. At that point Dubai Islamic Bank would next be heading towards a prior monthly resistance zone around 6.40 to 6.48. That price zone is then following by resistance around the 2015 peak of 7.00.

Watch last week’s low for near-term support as a drop below it will be short-term bearish.

Dubai Financial Market was flat last week, ending at 1.14. For the past month volatility has been relatively low with the stock trading within a range from a high of 1.17 to a low of 1.11. Whichever price level is exceeded next, either a drop below the low or a rally above the high, will likely lead to further moves in the same direction. The past two weeks have shown minor strength following four consecutive weeks down.

If strength is seen on a move above the four-week high then Dubai Financial Market will next be heading towards the most recent swing low of 1.26 and it has a good chance of getting above there. If it does exceed that peak then the stock heads towards 1.33 to 1.35. That higher target is where a measured move is completed. This is where the second rally off the May low will match the price appreciation seen in the first leg up or rally off that low.

There are then higher targets but first lets watch for the lower breakout levels to be exceeded and for signs of additional strength coming back into the stock.

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

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