lAE markets trigger breakdowns, with further downside seen

BRUCE POWERS

T he recent uncertainty in UAE markets which was discussed in last week's column has been resolved to the downside with stocks sliding across the board.

This uncertainty was reflected as price consolidation of market indices over the past couple of months where we had a relatively lower or low volatility market environment. As often happens this is frequently followed by a period of high­er or high volatility as price breaks up or ·down out of consolidation.

Last week we also saw a little of both in global markets with sharp drops in gold, silver and the British pound, and a continuation of a credible rally in oil.

Strength seen in oil though did not carry-over to UAE markets. Price patterns point to further downside for UAE markets which could become more pronounced given the pickup in global market volatility.

Dubai The Dubai Financial Market General

Index (DFMGI) fell by 119.75 or 3.45 per cent last week to end at 3,354.63, its worst weekly decline in five months. There were only four advancing issues and 34 declin­ing, while volume fell to an eight-week low. At the week's low of 3,340.21 the in­dex was 8.5 per cent below the 2016 high of 3,623.70 hit eight weeks ago.

A bearish head-and-shoulders trend reversal pattern was triggered last Mon­day, the first day of trading given that Sun­day the markets were closed, as the index closed below 3,469.50, support of the pat­tern. ln addition, the 200-day exponential moving average (ema) was breached to the downside. As would be anticipated on such a move downside momentum accel­erated during the decline.

By measuring the height of the topping pattern and then subtracting that price dis­tance from the breakdown level (3,438.57) we can arrive at a potential minimum tar­get. In this case the target is .approximately 3,256. That price area was weekly support at least five times earlier in the year. It be­gins a price support range that goes down to 3,197.32, the swing low in May that end­ed a retracement off the earlier 2016 peak from April. Although not assured, at this

•mm laTJ:II'I'r:'l Top weekly gainers Close Change OfoChg Dubai Market General Index

General Index 3,354.63 DFM DIN 2.48

1-week change -119.75 MAZAYA.DFM 1.44

1-week% change -3.45% MARKA 1.15

Advanced 4 TABREED 1.82

Declined 34 ADNIC 2.41 ADX BILDCO 0.55

DANA 0.55 JULPHAR 2.19 NMDC 4.7

0.32 0.18

0.05 0.05 0.21 0.02 O.D2 0.07

0.1

. 14.81%

14.29% 5.45% 2.82% 9.55% 3.70% 3.70% 3.30% 2.17%

Sep 2015 Mar Jun Sep 2016 Jun Sep

5052

4280.04

3606.73

2409.79

••om•l iF.l~laTJ:II'I'r:'l Top weekly dec liners Close Change OfoChg Abu Dhabi Market General Index

General Index 1-week change

1-week% change

Advanced Declined

4,389.6 -86.72

-1.94%

9 24

DFM AMAN DSI DARTAKAFUL DFM EKTIITAB.DFM

ADX NCTH GMPC RAKBANK METHAQ ADAVIATION

point we can anticipate support to be seen within this 3,256 to 3,197 price zone.

ln particular, the low of the zone is critical as it represents a key component of the price structure of the uptrend com­ing off the January lows. If broken to the downside and if weakness is confirmed by a daily close below that price level then the intermediate outlook for the DFMGI moves towards negative. Further compounding the concern is a double top- trend reversal pattern that would be triggered on a drop below 3,197. The two peaks that occurred in 2016 create this potentially bearish pattern, but it is not confirmed unless triggered and it could always evolve into a different pattern.

If a bounce occurs in the near- term watch for resistance near the bottom of the head and shoulders pattern from around 3,430 to 3,450.

Abu Dhabi Last week the Abu Dhabi Securities

Exchange General Index (ADI} dropped by 86.72 or 1. 94 per cent to close at

0.541 -0.059 -9.83% 0.454 -0.048 -9.56%

. 0.952 -0.088 -8.46% 1.22 -0.09 -6.87%

0.443 -0.032 -6.74% 3.29 -0.35 -9.86%

2.5 -0.2 -7.41% 5.1 -0.39 -7.10%

0.82 -0.06 -6.82% 2.75 -0.2 -6.78% Sep 2015 Mar

4,389.60. This was the biggest one­week decline in five months and was ac­companied by seven-week low volume. There were nine advancing issues and 24 declining. As of last week's 4,369.27low the index was down 5.5 per cent from the late-July peak of 4,621.50.

For the previous eight weeks or so the AD I had been forming a potentially bull­ish descending wedge pattern, which has an expectation of eventually break­ing higher. This pattern is defined by two descending trend lines that are angled towards each other, with one across the top of the pattern and one along the bot­tom. Last week's sharp decline clearly pierced below the lower trend line of the pattern thereby invalidating the pattern. At the same time the index fell below its 200-day ema (now at 4,438.44) on a daily closing basis for the first time since moving above it in mid-June.

The next price zone to watch for sup­port is around 4,339 to 4,308, followed by 4,265 and then the critical4,175 price area. That lower price ended a five-week

Jun Sep 2016 Jun Sep

©Gulf News

decline in May, which led to a strong rally.

Stocks to watch National Central Cooling (Tabreed)

was the fourth best performer in the Dubai market last week, up 2.82 per cent to close at 1.82, the highest weekly close since August 2014. This occurred as the wider market declined, reflecting the relative strength of Tabreed. Year-to ­date the stock is up 51.7 per cent, mak­ing it the sixth best performer in Dubai.

Although strong stocks have a ten­dency to stay strong for some period of time, in the short- term Tabreed is showing early signs of exhaustion. Last week's high of 1. 92 would need to be ex­ceeded for a new bullish signal, while a drop below last week's low of 1.70 will likely lead to a deeper retracement and a period of consolidation.

• Bruce Powers, GMT, is chief technical analyst atwww.MarketsToday.net. He is based in Dubai.

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