Both UAE markets ended 2013 in the top four best-performing equity markets globally. Dubai came in second with a 107.69 per cent gain, and Abu Dhabi fourth at 63.08 per cent. The Dubai Financial Market General Index (DFMGI) had is largest one-week gain since mid-September 2013 last week, closing up 164.34 or 4.97 per cent, and ending at 3,472.29. Volume was lower than the prior week but still at the second highest level of the past 10 weeks. This is not a surprise given the shortened trading week due to the New Year’s holiday. Strength was evident in the majority of listings, with 23 advancing and 10 declining. The DFMGI has now recovered 30 per cent of the 84 per cent decline that followed the 8,544.67 top in 2005. The index found a bottom at 1,294.1 in January 2012 , and has since gained 168.3 per cent. Buyers clearly remain in charge with upside momentum accelerating. However, the DFMGI is now in its seventh week of a short-term rally and is moving higher into more extreme overbought territory. Therefore, investors can expect the trend to continue for now but should be ready for signs of weakening. Certainly, if gains persist it wouldn’t be surprising to see the rate of the advance slow noticeable over the next two to three weeks. The next more significant potential resistance area is around 3,624.67. That’s only 4.4 per cent away. That price level can also be looked at as the bottom of a potential resistance zone going up to approximately 4,060. For the current short-term rally over seven weeks the index is up 26 per cent. That’s less than 1 per cent away from the lowest rally of the prior three, which was 26.6 per cent, and occurred during last summer. Near-term support is at last week’s low of 3,278.91. The short-term seven-week uptrend remains intact as long as the DFMGI stays above that support level. Lower would be 3,216.60, followed by 3,118.05. ABU DHABI Last week the Abu Dhabi Securities Exchange General Index (ADI) gained 173.55 or 4.15 per cent, closing at 4,359.20. This was the largest one-week advance since September 12, 2013 , and it occurred on strong volume. Even with the shortened four-day trading week volume reached the fifth highest level in four years. The strength of the move was further confirmed by market breadth, with 32 advancing issues versus 12 declining. As of last week the ADI has surpassed the 50 per cent retracement level of the decline from the 2005 top. The decline off that top took the ADI down 66 per cent, with it finding a bottom in January 2009 . Since then the ADI has advanced 104.7 per cent. Over the past seven weeks the ADI is up 15.85 per cent, closing strong, near the high of the weekly range, on most of those weeks, including last week. The next potential resistance area starts around 4,413, and is followed by a more significant resistance zone around 4,553. Each price level is based on prior monthly price levels. Support is at last week’s low of 4,185.65, followed by 4,205. On a daily basis the ADI is nearing its most extreme overbought reading of the past five years. Therefore, the odds are good that it will see resistance at one of the two price levels mentioned above, if it makes it that far. STOCKS TO WATCH Given the overbought conditions of many listings, look for opportunities in stocks that are showing signs of starting new moves. Two of those are below. The Dubai Financial Market (DFM) reached a new high for its uptrend, closing at 2.51, up 7.73 per cent for the week. An upside breakout occurred on trade above 2.39. The stock had been consolidating in a relatively tight sideways range for the prior 10-weeks. Volume improved to a four-week high, and the second highest level in twelve weeks. And the stock closed strong, in the top quarter of the week’s range. Given the breakout investors are likely to look to enter more aggressively on any weakness. The breakout level of 2.39 is the area to watch for support during pullbacks, or higher. The next potential resistance area is around 2.75, the five-year high reached in October of 2009. That’s 9.6 per cent higher. However, given the price structure of the uptrend since the January 2012 low of 0.678, there’s a good chance that price will eventually be exceeded. The next higher target would then be around 3.14. National Central Cooling (Tabreed) has also been consolidating sideways in a tight range for the past 17 weeks, much longer than DFM. A breakout occurs above 2.52, resistance during the consolidation phase, with confirmation of strength on a daily close above that price level. Last week the stock attempted to move higher as it reached 2.53 before pulling back to close at 2.50, up 3.31 per cent for the week. In this case volume is indicating investors should take notice, as it reached a 12-week high prior to a sustainable breakout.
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