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Dubai: look for the break

Posted: 10/17/2012 - 9:18 am

The much highlighted resistance level at 1650 continues to be tested by the Dubai index (DFMGI) further validating our latest view on the market (read: Dubai: price action at its best).

In our note dated October 10, we highlighted the anticipated run up in the DFMGI and we said that while our bias towards the index remained positive, the important resistance at 1650 required a shift to a cautious trading approach (i.e. the need to hedge the downside risk).

The price action confirmed our analysis as the index shifted from a rally mode to a neutral mode in the past six trading sessions. The latest range (in red) reflects indecision in the market and hints at either a positive consolidation or a potential distribution that could trigger a pull-back: Only a break from the range will tell the full story.

In our view, that break will likely be determined by the upcoming third quarter results as many companies have yet to report their financial figures. That said and irrespective of which direction we expect the market to take, there is little change in our view.

In short, we reiterate our call for a cautious trading approach while maintaining a general positive view on the market. Our short term focus is on the upcoming breakout from the range as it should shape our next trading position.

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