The Dubai Financial Market is expected to test its short-term resistance channel of 1,800-1,850 points in the next few sessions after it rebounded sharply yesterday.
The index gained 126.91 points, or 7.76 per cent, to close at 1,763.2.
Twenty-six stocks advanced, three declined and one remained unchanged.
Turnover levels were good as 454.5 million shares worth a total of Dh641 million changed hands. This was nearly three times the level of turnover on the last trading session of 2008.
Shuaa Capital gained its limit up of 15 per cent to close at Dh1.15, while Emaar, Arabtec, DFM and Air Arabia almost reached their limits up.
There was strong positive sentiment at the beginning of the first trading session of the year due to the strong advances recorded by global and regional markets combined with increasing liquidity and low selling pressure.
"There was strong positive sentiment due to rallies in international markets during the previous two sessions," said Hosam Al Husseini, head of brokerage at Emaar Financial Services.
"From the beginning of the session there were strong buy bids for Emaar, DFM and Dubai Islamic Bank shares. The rally in these stocks attracted more investment and most of the listed stocks rallied by their up limits during the session.
"There were two main groups of players – foreign institutions and local individual investors. However, almost 90 per cent of purchases by foreign institutional investors came from one institution, so this cannot reflect a real return to strong investment in the DFM by foreign institutions. We would have to see this trend from several foreign institutions.
"Local individuals were buying active stocks for short-term investment and profit-taking. This is worrying because it reflects the continuous speculative nature of their investment. We still need to see long-term investment."
Al Husseini said he expected the DFM to continue its rebound during the next few sessions after selling pressure declined to very low levels – a major change from the situation at the end of 2008.
"The index is expected to break through its historical bottom of 1,800 points and it could reach 2,000 points in the short term. The DFM was above this level for a long time and there are high expectations that it will rebound past its historical bottom.
"The DFM's chances of breaking through its resistance levels are higher than those of the Abu Dhabi Securities Exchange because the Dubai index declined sharply for a long time. However, if the markets break these resistance levels they will face overlaps due to selling pressure and profit-taking."
Shiv Prakash, a technical analyst at MAC Capital Advisors, said most of the stocks were seen at their upper limits and closed higher while trading at very good volumes.
"This is a clear sign that accumulation is happening in the markets," he added.
"Emaar retreated for a few days but gave a bullish reversal to close on its upper limits at Dh2.59. The stock looks set to maintain its bullishness until encountering its first resistance at Dh2.85. The next level comes at Dh3.18. Arabtec could reach the Dh3.22 level in the coming sessions."
Prakash said the DFM's stock had clearly broken the resistance areas of Dh1.35 and would head towards the long-term resistance channel of Dh1.55 to Dh1.70 in the next few sessions.
However he said Dh1.33 would be the stop loss level.
"IAIC, which was recommended as a buy at Dh0.78, went to its upper limits at Dh0.89 and looks to continue rising towards its first resistance level at Dh0.94 and then to Dh 1.16 in the short term," said Prakash
ADX sees corrective balance
The Abu Dhabi Securities Exchange followed the DFM upwards yesterday, adding 134.80 points, or 5.64 per cent, to end the day at 2,524.81.
The index is close to a resistance level at 2,600 points and would then face strong resistance at 2,700.
The index continued its corrective bounce, which started before the end of 2008. Thirty-one stocks advanced out of the 42 that were traded, while nine declined and two remained unchanged. Turnover nearly doubled during the session with 110.8 million shares changing hands at a total value of Dh175.6 million.
Real estate and energy stocks were the most active shares on the market. Aldar and Sorouh saw very active movements from the beginning of the session as both stocks advanced by around 10 per cent and continued to dominate trading until the market closed. Dana and Aabar also attracted strong investment.
The session was extended by 40 minutes after a breakdown of the trading system delayed the opening by the same length of time.
A market spokesman said 35 brokers were unable to access the system and the authorities suspended activities to ensure fair trading.