A sharp decline in trade value and volume as well as the number of trades on the Dubai Financial Market (DFM) suggests strongly that the end of the downward trend could be close, say analysts.

Observers forecast a new phase of horizontal trading until the end of August in preparation for an upward swing after the summer. The DFM maintained its support level of 5,400 points yesterday and closed at 5,407.65, though it lost 29.89 points, or 0.55 per cent. The market failed to maintain the psychologically important Dh1bn trade value level that was the dominant feature of trading during the two previous sessions.

Trade value declined sharply by more than 50 per cent to Dh488.5 million and trade volume also retreated dramatically from 338.4 million shares on Thursday to 100.6 million yesterday. Six stocks advanced out of the 26 traded during the session while 18 declined and the other two remained unchanged.

The sharp decline in trade value and volume while the market was dropping gave a very positive sign that investors were refraining from selling stocks at current price levels, said Waleed Al Khateeb, head of trading at Daman Securities.

This strengthened the feeling that the market trend was poised to head upward so investors were waiting for this to happen.

"We noticed two main signs in the current trading in the DFM – firstly the strong impact of the summer as all market indicators are declining, including trade value and volume and the number of trades.

"The other major sign is the horizontal movements in the market as there are limited movements up and down in the index. This is a good indicator that the market has reached the bottom – but this trend should continue during the next 10 sessions to ensure that this is a real bottom and the market will change its trend to the upward side," he added. "Yesterday's session indicated that major investors and institutions were collecting stocks and refraining from selling aggressively. If this continues during the next few sessions it will reflect the belief of major investors that the DFM will change its trend very soon."

Al Khateeb said the predicted horizontal movements during the next few sessions would increase the positive sentiment among investors and support the index above the 5,400 level during the next month.

Mohamad Al Beheiri, head of trading at Amana Financial Services, agreed that the decline in trade value and volume was a positive indicator. "There is a positive sentiment and increasing trust that the down trend in the DFM is approaching its end so investors are refusing to sell stocks at the current levels," he said. "They will wait until the market gives strong indicators of a new upward trend. Since Wednesday's session the DFM has tried several times to hit the resistance level of 5,500 points and if the market reached this level it would be able to reach the level of 5,600, which is a very important level to open the upward trend."

Analyst Wadhah Al Taha said trading was concentrated, reflecting increasing institutional investment. "The average value per trade on the DFM reached Dh122,500," he said. "Despite the decline in trade value and volume there was concentration in trading which means major players are back in the market."



ADX holds over support level

Abu Dhabi Securities Market (ADX) declined by around half a point yesterday to close at 5,005.17 points – remaining just above the support level of 5,000 points. Trade value and volume declined to Dh508mn and 97 million shares respectively. A total of 39 shares were traded with 26 declining, nine advancing and four remaining unchanged. There was high concentration in trading as the average value per trade jumped to Dh 248,000 – more than double the concentration in the DFM. "This reflects the increasing number of institutional investors in ADX and reflects stronger signs of an upward trend," said Al Taha.

"The index remained over its important support level of 5,000 points and needs to continue over this level for the next few sessions. The telecommunications, construction, energy and industry sectors created huge pressure yesterday but the banking and services sectors supported the index so the decline in the ADX was very limited."



Major role for Emaar

Emaar stock is expected to play a major role in supporting the current trend at the DFM.

"Emaar resisted selling pressure in yesterday's session and remained over the important resistance level of Dh10.50 per share," said Taha. "This is quite encouraging in terms of holding the DFM over the 5,400 level." Beheiri said Emaar's current price might open an upward trend in the stock to higher resistance levels at Dh10.70, Dh10.90 and Dh11.15.