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Qatar: supported by one stock

Posted: 10/31/2012 - 1:52 pm

On October 21, we said that the Qatar index (QSI) successfully tested the support at the 8420-8450 zone and that our call to go long on October 11 (read: Qatar: to buy or not to buy and Qatar: holding on) played out well. We also highlighted the index’s break above the short-term down trendline (red line) saying that the move was positive for the market. The key risk we highlighted back then was the fact that the gains were almost solely driven by the heavyweight Industries Qatar. Our view was that any material upside will have to be supported by a broad rally in the market especially since Industries Qatar was approaching a key resistance level.

We have witnessed six trading sessions since then and the QSI has been more or less flat over the period despite seeing Industries Qatar gain an additional 2%. This indicates that the rest of the market remains weak and that a catch-up by the other underlying stocks in the market is indeed required to push the QSI higher.

Technically, the index remains in positive mode as it continues to move along the July-to-date up trendline. At this point, there is no justification to turn on our positive bias towards the QSI but we are concerned for the lack of strength in most underlying stocks in the market. Should we fail to see a pick-up by the other stocks as Industries Qatar closes in on its resistance at 155 (stock currently at 152), a switch to a neutral view will likely be in order.

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