PHOTO
Last week the Dubai Financial Market General Index (DFMGI) fell by 26.71 or 0.78 per cent to close at 3,393.46, a new weekly closing low for the current decline. Downward pressure was spread through the market with only eight issues that advanced and twenty-five declining. Volume for the week was essentially flat compared to the previous week.
The overriding chart pattern for the DFMGI is a series of lower weekly highs. As of last week that pattern has persisted for six straight weeks. What we don’t see is a continuation of the pattern of lower weekly lows which would be more bearish, as last week’s low found support right around the 3,382.83 low from three weeks ago. Last week’s low was 3,381.67, and together with the three-week low creates a shelf of support for the index. So far there is no sign of buyers stepping in but the index has stopped going down so far.
There are a couple primary scenarios that look plausible for the near future given the price action of the past month, as the DFMGI is still attempting to find a bottom. The two lows mentioned above could turn into the beginning of a double bottom trend reversal pattern. Although the pattern is not perfect given its shape, there are two bottom, with the caveat that the second bottom still needs a little more confirmation. Regardless, the pattern is not confirmed as a double bottom until there is an upside breakout. That wouldn’t occur until there is a decisive rally above 3,476.27.
At the same time the past four and a half weeks have taken the form of a falling consolidation pattern. It is starting to shape up as a potential bullish wedge pattern. This is a classic chart pattern, which in this case could lead to a trend reversal rather than a continuation, if an upside breakout occurs. The wedge can be either a trend reversal pattern or a trend continuation pattern. The bullish wedge angles down and is marked by a downtrend line across the top of the consolidation pattern and a downtrend line across the bottom. Each of the lines are angled such that they will cross at some point in the future.
This pattern may still be in its earlier stages and continue to evolve if the DFMGI falls below last week’s low. Given the shape of the pattern the index has approximately 4-5 weeks left before it would breakout of the wedge or evolve into a different pattern. This means that the 3,357 price zone looks like an area that should see more significant support if the index does weaken further over the coming weeks.
Abu Dhabi
The Abu Dhabi Securities Exchange General Index (ADI) fell slightly last week, by 6.14 or 0.14 per cent to end at 4,276.93, a new weekly closing low for the current downtrend. There were 10 advancing issues and 19 declining, while volume slipped to a five-week low.
An attempt was made earlier in the week by the bulls to drive the market higher as the index broke out above its two-week consolidation pattern on a move above 4,310.19. That move gave a bullish signal. There was also a daily close above that high, providing some confidence that the breakout could hold. Nevertheless, it didn’t last as sellers quickly came in and pushed the index to a new low for the current downtrend. The ADI fell below 4,295.46 support and closed below it on a daily basis. The low for the week, and now support of the downtrend, was at 4,244.50.
Overall, last week’s price action reflects uncertainty among investors as sentiment swung quickly from bullish to bearish. Another breakout either up or down now becomes suspect given the failure of last week’s breakouts, up and down, to follow-through as they might. Regardless, this is all we have to go by.
Support is now at last week’s low with a move below it providing a short-term bearish signal. The ADI then would likely head to a support zone from around 4,207 to 4,174.71. Last week’s high of 4,338.11 is resistance, with a move above it improving the chances for further upside. An upside breakout faces a first possible resistance zone from around 4,355 to 4,396.
Stocks to watch
Union Properties was the second best performer in Dubai last week, up 2.45 per cent to close at 0.835. The stock popped up to a five-week closing high on Thursday as daily volume spiked to a 29-day high. It looks like this could be the beginning of a bottom that could see buying pressure build for Union.
The low of the past five weeks is at 0.80 and it is the important support level to watch. As long as the stock holds above that support zone the odds favour further strength.
An eventual move up to at least the 61.8 per cent Fibonacci retracement at 0.892 seems possible and also a test of the October 0.949 high is not out of the question. Of course it could also exceed that high. That would be an important milestone as it would also signify a bullish breakout of a multi-month descending channel retracement, that began off the January peak of 1.13.
The overriding chart pattern for the DFMGI is a series of lower weekly highs. As of last week that pattern has persisted for six straight weeks. What we don’t see is a continuation of the pattern of lower weekly lows which would be more bearish, as last week’s low found support right around the 3,382.83 low from three weeks ago. Last week’s low was 3,381.67, and together with the three-week low creates a shelf of support for the index. So far there is no sign of buyers stepping in but the index has stopped going down so far.
There are a couple primary scenarios that look plausible for the near future given the price action of the past month, as the DFMGI is still attempting to find a bottom. The two lows mentioned above could turn into the beginning of a double bottom trend reversal pattern. Although the pattern is not perfect given its shape, there are two bottom, with the caveat that the second bottom still needs a little more confirmation. Regardless, the pattern is not confirmed as a double bottom until there is an upside breakout. That wouldn’t occur until there is a decisive rally above 3,476.27.
At the same time the past four and a half weeks have taken the form of a falling consolidation pattern. It is starting to shape up as a potential bullish wedge pattern. This is a classic chart pattern, which in this case could lead to a trend reversal rather than a continuation, if an upside breakout occurs. The wedge can be either a trend reversal pattern or a trend continuation pattern. The bullish wedge angles down and is marked by a downtrend line across the top of the consolidation pattern and a downtrend line across the bottom. Each of the lines are angled such that they will cross at some point in the future.
This pattern may still be in its earlier stages and continue to evolve if the DFMGI falls below last week’s low. Given the shape of the pattern the index has approximately 4-5 weeks left before it would breakout of the wedge or evolve into a different pattern. This means that the 3,357 price zone looks like an area that should see more significant support if the index does weaken further over the coming weeks.
Abu Dhabi
The Abu Dhabi Securities Exchange General Index (ADI) fell slightly last week, by 6.14 or 0.14 per cent to end at 4,276.93, a new weekly closing low for the current downtrend. There were 10 advancing issues and 19 declining, while volume slipped to a five-week low.
An attempt was made earlier in the week by the bulls to drive the market higher as the index broke out above its two-week consolidation pattern on a move above 4,310.19. That move gave a bullish signal. There was also a daily close above that high, providing some confidence that the breakout could hold. Nevertheless, it didn’t last as sellers quickly came in and pushed the index to a new low for the current downtrend. The ADI fell below 4,295.46 support and closed below it on a daily basis. The low for the week, and now support of the downtrend, was at 4,244.50.
Overall, last week’s price action reflects uncertainty among investors as sentiment swung quickly from bullish to bearish. Another breakout either up or down now becomes suspect given the failure of last week’s breakouts, up and down, to follow-through as they might. Regardless, this is all we have to go by.
Support is now at last week’s low with a move below it providing a short-term bearish signal. The ADI then would likely head to a support zone from around 4,207 to 4,174.71. Last week’s high of 4,338.11 is resistance, with a move above it improving the chances for further upside. An upside breakout faces a first possible resistance zone from around 4,355 to 4,396.
Stocks to watch
Union Properties was the second best performer in Dubai last week, up 2.45 per cent to close at 0.835. The stock popped up to a five-week closing high on Thursday as daily volume spiked to a 29-day high. It looks like this could be the beginning of a bottom that could see buying pressure build for Union.
The low of the past five weeks is at 0.80 and it is the important support level to watch. As long as the stock holds above that support zone the odds favour further strength.
An eventual move up to at least the 61.8 per cent Fibonacci retracement at 0.892 seems possible and also a test of the October 0.949 high is not out of the question. Of course it could also exceed that high. That would be an important milestone as it would also signify a bullish breakout of a multi-month descending channel retracement, that began off the January peak of 1.13.
Reporting by Bruce Powers
Bruce Powers, CMT, is a technical analyst and global market strategist.
© Al Nisr Publishing LLC 2017. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info).
