Last week the Dubai Financial Market General Index dropped by 52.86, or 1.51%, to close at 3,450.89, the fourth consecutive week of negative performance. Market breadth moved closer to balancing as there were 16 advancing issues against 21 declining, while volume increased to a four-week high. Volume levels remain near the low end of the range of the past two years.
After triggering a drop below the prior week’s low of 3,476.63, the index found support at 3,403.23, just above the potential support zone around the 200-week exponential moving average, which is now at 3,388.85. So far the descent has been halted and it could end with last week’s low. Or, there could be another test of the 200-week EMA price area, in which case downward momentum may be subdued given that it is now in the fifth-week of a decline. Last week’s low is in a support zone, based on previous weekly support, which goes down to around 3,358, Gulf News reported.
Since the DFMGI moved back above its 200-week EMA two-and-a-half years ago, the index has dropped down to the moving average three times before last week, and support was seen each time.
A relatively quick rally followed reflecting capitulation by sellers. Last week a similar response was not seen as the index ended in the lower half of the week’s range. This may be due to underlying bearish sentiment or the level of uncertainty that is reflected in the larger chart pattern configuration and low volume levels.
Given the above, if a bounce comes in the near-term it may carry less conviction than previous rallies off the 200-week EMA, and also not move as high. In addition, a bounce from current levels heads immediately into a one-month congestion range, beginning from around 3,503 and up to 3,740.
A move above last week’s high of 3,541.46 gives the first sign of strength. The DFMGI then heads up towards a potential resistance around 3,648 to 3,652, consisting of the confluence of the two-week high and two moving averages.
The 200-week EMA is a good long-term trend indicator. As long as the DFMGI stays above it, the long-term uptrend, begun from the January 2012 lows, remains in place. So far the index has not closed below it on a weekly basis since April 2013. This means that a weekly close below the 200-week EMA would be a potentially significant development and put the sustainability of the long-term uptrend into question.
The Abu Dhabi Securities Exchange General Index fell by 59.24 or 1.37% last week to end at 4,262.80, its fourth consecutive week of falling prices. There were 10 advancing issues and 22 declining, while volume rose to a four-week high.
The ADI ended weak, closing near the low for the week of 4,251.68. That’s near the bottom of a potential support zone that ends at 4,252.18, based on previous weekly support.
