Dubai set to go higher while Abu Dhabi remains stalled
(6/3/2018 11:15:00 AM)
Last week the Dubai Financial Market General Index (DFMGI) improved by 9.67 or 0.33 per cent to end at 2,964.13, the highest weekly close in five weeks. Nevertheless, market breadth was clearly bearish, with 27 declining issues and nine advancing. It’s likely that this is because the index was falling up until Thursday’s sharp 1.9 per cent rally. Volume was healthy for the week, coming in a little below the prior week’s level but still the second highest volume in 18 weeks.
Four weeks ago the DFMGI hit a low of 2,870.07 and it has been attempting to rally since. Each of the subsequent three weeks since that low have ended positive and there is now the early part of a series of higher weekly lows. Last week was an inside week, so there was a higher low but not a higher weekly high as there had been the week before.
As of last week’s 2,977.2 high the index had moved up by 3.75 per cent from the recent low. Regardless, it has not yet given a significant bullish signal. This will happen on a daily close above the four-week high of 2,985.33. Interestingly, the high-to-low price range of the past three weeks is all contained within the weekly range from four weeks ago. That’s the week the index bottomed, at least so far, and it is therefore an integral part of the downtrend chart structure that began off the October peak. This is just another way to consider the consolidation phase of the past month.
Further, when looking at the daily chart there is a clear potential double bottom trend reversal pattern that has developed. A bullish breakout of that pattern triggers on a move above 2,977.63, which is the two-week high. Given that the four-week high and top or resistance of the double bottom pattern are very close together, the higher price level should be given greater weight.
Following a daily close above 2,985.33 the DFMGI will next have a better chance of eventually reaching a key resistance zone, which is from approximately 3,195 to 3,264. That range is along the lower border of a large consolidation pattern. A breakdown from the pattern occurred in early-March.
If the index can get going with bullish momentum, first with a move above the four-week high, then the key resistance zone is a minimum initial major target. This would mean that short-term weakness can be used to prepare for a continuation of strength over time. Of course, alternatively, a drop below 2,870.07 changes the above near-term bullish scenario to bearish.
The Abu Dhabi Securities Exchange General Index (ADI) was essentially flat last week, up only 3.95 or 0.09 per cent to close at 4,605.04. There were 17 advancing issues and 15 declining, while volume reached a three-week high.
Even though there was some weakness earlier in the week, by Thursday’s close the ADI managed to end in the top quarter of the week’s high-to-low range, and at a five-week closing high. This shows upward momentum is being sustained. Not enough yet though to counter the selling pressure that is being encountered.
A daily close above last week’s high of 4,619.24 gives the next bullish signal. After that, watch for a daily close above that level to confirm strength. Regardless, the ADI continues to encounter resistance up until above the most recent peak of 4,721.62 from mid-April. If the ADI can get above there a strong bullish signal will be triggered as that would indicate a breakout of a two-year consolidation zone and therefore a continuation of the long-term uptrend that started off the January 2016 lows.
On the downside, a drop below last week’s low of 4,536.82 points to a deeper retracement and likely test of the most recent 4,414 swing low bottom from three weeks ago.
Stocks to watch
The top performer in the Dubai market last week was Dubai Islamic Bank. It was up 0.29 or 6.1 per cent to end at 5.07, as weekly volume spiked to a 14-month high. This may be just the beginning of a move higher off recent bottoms. What also makes Dubai Islamic interesting is that a breakout of a bullish double bottom trend reversal pattern occurred on Thursday as the stock rose above 5.057, and closed above it on a weekly basis. The pattern formed right around support of the long-term downtrend line that starts from the September 2014 peak.
We see additional signs of strength when looking at the monthly chart. As of May there is a higher monthly high and higher low when compared to the prior month of April. This is an early sign for the beginning of an uptrend. Further, the month ended strong, at a three-week high and in the top quarter of the month’s range.
A daily close above last month’s high of 5.10 provides the next bullish signal with the first target around 5.29, which is a price area for both support and resistance in the past. Next, there is the 5.43 potential resistance zone, followed by approximately 5.61.
Given the above analysis, intraday weakness can be used to build a position in anticipation of a continuation of last week’s bullish behaviour.