Dubai: Last week the Dubai Financial Market General Index (DFMGI) had it largest one-week gain since early-September 2013. The index was up 322.61 or 8.10 per cent and ended at 4,303.55, a new weekly closing high for the uptrend. Volume reached a three-week high, with most stocks participating. There were 28 advancing issues and only seven declining. For 2014, the DFMGI is up 27.7 per cent.
As discussed last week, analysis of the weekly chart had indicated there was a good possibility that the DFMGI would continue to weaken in the near-term as key weekly support levels had been surpassed on the downside. Now, given the strong performance last week, a new weekly closing high, which moved the index easily through a potential resistance zone (range at prior peak), and improving volume, the DFMGI is again indicating that the uptrend is likely to continue.
The recent correction (decline from peak to swing low) was 9.07 per cent, slightly less than the average of seven corrections that have occurred since the DFMGI bottomed back in January 2012. Further, the retracement that occurred in the most recent trend, measured from the mid-November 2013 low to the recent peak of 4,255.19, was 25.7 per cent. That’s a relatively shallow pull back and a sign of strength in the underlying the advance.
Upside follow through is now needed for further confirmation that the move last week has some legs. Watch for a decisive rally above last week’s high of 4,306.77, followed by a daily close above that price level. That would put the DFMGI close to completing a 61.8 per cent Fibonacci retracement (4,397) of the shorter long-term downtrend, that started from the January 2008 peak. Given how close that level is, and that last week confirmed a continuation of the uptrend, there’s a good chance it will be surpassed.