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Bullish trend expected to continue.

Byline: Bruce Powers, Special to Gulf News

Dubai: A number of major international market indices in Asia, Europe and the US broke resistance levels last week with many traders anticipating further upward momentum in the coming weeks.

Although a pullback in these markets is likely, in the short term the positive international sentiment could begin to impact the UAE exchanges.

Both the Dubai Financial Market General Index (DFMGI) and Abu Dhabi Securities Exchange General Index (ADI) barely moved higher last week in relatively quiet trade. Although the moves up were small, the indices did not go down, showing that buyers were holding on in the market.

The DFMGI saw a slight bounce of 14.58, or 0.8 per cent, to close at 1,751.76 while volume was down 23 per cent from the previous week on a shortened schedule of four trading days. Advancing issues beat decliners by almost two to one, with 15 listings advancing and eight declining

In Abu Dhabi the ADI was up 34.09 or 1.3 per cent closing at 2,711.17 with volume higher by 25 per cent from the previous week. Advancing and declining issues were equal with 21 each.

The odds favour a further move up to the 1,840 area at a minimum in the DFMGI which would be a 32.8 per cent retracement of the downtrend started mid-June. A move through Thursday's high value of 1,758.54 would be the next sign of strengthening with the next more significant resistance level being 1794.78, Tuesday's high.

The closest support zone is between 1,648 and 1,712. If the DFMGI breaks this zone the risk of going lower increases. After that the more important support level is at 1,618.09, the low of July 139. A breakthrough that level confirms a continuation of the downtrend started mid-June rather than a trend higher.

The biggest gainer of the week was Dartakaful which improved Dh0.26, or 12.2 per cent to close at Dh2.40 on volume improvement of over 400 per cent from the previous week. It's now in a minor pullback period but could have upside follow through before the end of the week.

It was followed by Tabreed which increased Dh0.07 or 8.3 per cent to close at Dh0.91 and has now had seven up days in a row. A rest and some choppiness is likely before continuing its uptrend.

The third biggest gainer was Takaful-Em, up Dh0.11, or 7.4 per cent for the week to close at Dh1.60. It is sitting on its 100 period exponential moving average (lower curved line in chart) support after a pullback mid-week.

A move above Thursday's high of Dh1.62 could signal a continuation of the larger uptrend, but a break below Dh1.55 is a sign of short term weakening.

The ADI stayed followed through on its break out of the double bottom trend reversal pattern mentioned last week. A break through Thursday's high of 2,720.75 would signal buying strength continuing which could push the ADI up to the 2,761.50 area, a 50 per cent retracement of the downtrend started mid-June.

The ADI has been up for just about each of the past seven trading days. A move back down to the breakout level of 2,672.9, now support, wouldn't be surprising as the move last week was showing signs of slowing down, possibly setting up for some mild profit taking in the beginning of the week.

The biggest gainer was Aabar Investments which had very nice follow through of the previous week's move Aabar was up Dh0.32, or 16.6 per cent on strong volume to close the week at Dh2.25.

It touched resistance of the 200 period exponential moving average (upper curved line in chart) on Thursday possibly completing in the short term an almost 35 per cent move off the bottom hit July 13. Some profit taking at this point is likely.

Ras Al Khaimah Co. for White Cement improved Dh0.09, or 10 per cent to close at Dh0.99 and has seen a bit of consolidation towards the end of the week. This is a relatively low volume stock and better for investment than trading.

Emirates Foodstuff & Mineral Water had a strong follow through to last week's move improving Dh0.15, or 9.9 per cent to close at Dh1.67. A bit of a pullback at this point wouldn't be surprising.

Islamic Arab Insurance is sitting on its 200 period exponential moving average in minor consolidation. A break through the high of last week, Dh1.31, signals strengthening. Shuaa Capital has been in a tight sideways move for the past week sitting on its 100 period exponential moving average seen as short term price support. If the stock can break through resistance of Dh1.56 it could see moves higher.

Similarly, Deyaar Development has been in tight short term consolidation sitting on its support zone identified by the 100 period exponential moving average. Price moving through short term resistance of Dh0.77 signals strength of buyers. Union Properties has seen similar price behaviour recently with a break through Dh1.00, a sign of strength.

As mentioned last week, Emirates Integrated Telecommunications has established a bullish ascending triangle consolidation pattern with a breakout price above resistance of Dh2.71. It barely broke through that price level on Tuesday but failed to follow through to the upside. However, this bullish pattern is still in play with the pattern holding.

Aramex continues to be one of the stronger stocks technically in the DFM but likely to see a bit more profit taking in the short term. Certainly, the risk versus reward at this point calls for caution. However, keep an eye on it because things could improve before the end of the week.

First Gulf Bank still continues to be one of the relatively stronger stocks in the market on a technical basis closing at Dh14.85 near its recent highs. It's also sitting above the 200 period exponential moving average, a long term bullish sign. If price can move above last week's high of Dh15.25 on increasing volume then further moves up wouldn't be surprising.

Volatility has diminished noticeably over the past month in Sharjah Islamic Bank. Low volatility usually leads to higher volatility. In this case once a direction is clearly established, up or down, this stock is likely to start trending again. A move above Dh1.04, which is now short term resistance, indicates strengthening.

Dana Gas' price chart has formed a bullish symmetrical triangle consolidation pattern which would indicate good odds that when price moves out of the pattern the stock will continue its upward momentum.

A breakout above Thursday's high price of Dh1.13 would signal such a move with confirmation made once the price moves above Dh1.18. It is also sitting just above its 200 period moving average, a bullish sign. Confirmation means that the odds continue to increase that the stock will trend once the stock moves above the second price resistance level.

Green Crescent Insurance is indicating a clear resistance zone at Dh1.27-Dh1.28. A break through those price levels would signal strengthening. Methaq Takaful Insurance continues its downward price consolidation of the past month and a half.

At some point this stock could make another run and looks to be getting closer. The first sign of strengthening is if price breaks through short term resistance level of Dh5.42.

Aa

Bruce Powers is Senior Vice-President of Arab Capital Markets Resource Center, Dubai.

Disclaimer: Stock market investments are risky and past performance does not guarantee future results. Gulf News does not accept any liability for the results of any action taken on the basis of the above information.

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Publication:Gulf News (United Arab Emirates)
Geographic Code:7UNIT
Date:Jul 26, 2009
Words:1327
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