Profit booking drags DFM below resistance levels

Profit taking pushed the Dubai Financial Market (DFM) to reverse its direction yesterday, with its index losing 18.36 points, or 1.04 per cent, to close at 1751.10 points.

The DFM opened with a gap up yesterday and was trading in the green territory during the first half of the session until it hit its resistance area near 1800 points. The market turned bearish and profit booking intensified during the second half of trading, pushing the index to erase all its gains and ending in the negative area.

Analysts, however, saw such movements in the DFM index as normal behaviour at the current stage due to the lack of strong movers that could help the index to break its current resistance area of 1800-1850 points.

Turnover remained at moderate levels, with 446.2 million shares worth Dh603.8 million changing hands during the session. Trading focused on select real estate and construction stocks, with Emaar, Deyaar, Arabtec and Tabreed dominating the turnover. Also, the DFM and Air Arabia stocks attracted considerable trading yesterday.

The DFM index continued to move in the same direction as Emaar's stock, which opened with a gap up at Dh2.71 and tried to maintain its gains during the first half of the session but lost 2.26 per cent to close at Dh2.60. Air Arabia witnessed strong trading yesterday after a long period of calm movements. The stock ended the session flat at Dh0.94 after it advanced to Dh0.97 during intraday trading.

Most active stocks yesterday were moving in the same pattern, as they rallied to their resistance levels before facing profit taking and going down by the end of the session.

"The movements in the DFM at the current stage are purely technically motivated. The index rallied to its resistance of 1800 points and then faced profit booking and went down. The same trend was seen in all active stocks, especially Emaar, Tabreed, Arabtec and Deyaar," said Ahmed Al Rawi, a trading manager.

"Emaar rallied above its resistance of Dh2.68 but failed to maintain its gains and turned bearish quickly. Some panic selling was seen when the stock started to give up its gains, but this ended quickly and the movements in the stock turned sideways."

Al Rawi expected such sideways movements of limited ups and downs to prevail in the market during the next few weeks, as investors focus on news about the second quarter results.

"The early rally in the market was motivated by some good news, along with the recent rally in global markets. However, the DFM may face further corrections during the coming two sessions which could drag the index to its next support area of 1680 points.

"The same situation is expected in global markets, as there are high possibilities that the US and European markets will face profit booking during the next few sessions; this will affect the sentiment in local markets," said Al Rawi.

However, he expected the DFM to bounce up quickly after this correction and investors would track announcements of earnings during the coming weeks.

"Speculations will increase on some stocks before the meetings of boards of directors of listed companies and when companies announce their Q2 results. This will create volatility in the market. In general, the DFM is expected to move sideways in the near-term," said Al Rawi.

Nour Al Zo'by, General Manager at MAC Sharaf Securities, agreed that the movements in the DFM were based on technical analyses and the correction was expected.

"The DFM index has bounced up almost 10 per cent during the past few sessions and the correction was expected. However, the market is still in a good position as sentiment is improving. Total trade value during May reached more than Dh35bn, while trade values during recent corrections have stood at around Dh15bn. This is a positive indicator that selling pressures were minimal during the downward movements.

"Even the impact of global markets will not create high pressures on the DFM, as Q2 results of banks and listed companies in the US and Europe were giving positive indicators. This will help global markets to end the correction quickly," Zo'by said.

Zo'by said the market would continue to move on technical analyses as investors were cautious and waiting for Q2 results to build clearer investment strategies.


Expansion plans make Tabreed top gainer

Tabreed's stock was the top gainer yesterday after it added 4.65 per cent to close at Dh0.90. The stock witnessed strong movements during the session after the company announced plans to open 16 new plants in the country to increase its cooling capacity by 50 per cent.

Earlier this month, Tabreed secured financing of around Dh1.1bn and this created some rumours that it would use the money to refinance its obligations. However, its new chief executive explained that the refinancing would come in 2011 and the new funds would be used to finance its current projects.

"This was a strong motive for investors to accumulate the stock," said a trader at EFG-Hermes. "Positive news about Tabreed continued to reflect in the prices and trading volumes."

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