Abu Dhabi exchange faces correction trend

Correction in the Abu Dhabi Securities Exchange (ADX) has dragged the index close to a very critical support level of 4450 points, which is giving mixed signals about the short-term trend in the market despite the long-term trend still being on the down side. The ADX lost 33.61 points yesterday, or 0.75 per cent, and closed at 4462.78 points, approaching the level of 4450, which is considered by analysts as very critical for the future trend in the market in the next few months.

Analysts said leading stocks continued to play a positive role in the ADX and they will determine the pace of the correction in the index, in spite of the long-term trend remaining on the down side. However, selling pressures continued at the ADX and may lead to more losses. The index gained around nine per cent since the beginning of the year but lost them in the last two weeks.

"Despite fundamentals and indicators in the ADX being stronger than in the DFM, if the ADX index breaks through this level to the down side, it may continue declining to its next support level of around 4300 points. This will increase selling pressures and the negative sentiment in the market," said Mohamad Al Beheiri, head of trading at Amana Financial Services.

However, he cited positive indicators in the market that may break the pace of the downward trend. "The movement in leading stocks, such as Etisalat and FGB, is almost flat and they have been holding the index for a long time. Also, trade volumes in leading stocks are low and this is giving signals that their movements will continue to be limited.

"The index closed over the critical level of 4550 points and its needs to continue at the current level for several sessions to ensure a smooth downturn trend. A lot of liquidity exited the ADX during the last three weeks and investors are reluctant to enter again until the market determines its direction," Beheiri said.