Technical selling pressures will have the upper hand in shaping trading trends in UAE markets this week as buying powers are still weak and are expected to continue at low levels for several weeks, according to analysts.
The markets are projected to continue their sideways trading with some strong fluctuations in the indexes, but the turnover is expected to continue at low levels, with speculation dominating transactions.
"The markets closed with strong retreat last week. Trading behaviour on Thursday was very negative, a behaviour we did not see in the markets for the past three weeks. This is giving negative sentiment among investors," said Hosam Al Husseini, Head of brokerage at Emaar Financial Services.
Dubai Financial Market will start trading this week at 1,643.65 points, near to it support channel at 1,550-1,600. Abu Dhabi Securities Exchange also closed last week at 2,385.35 points, still away from it support levels at 2,200-2,250 points.
"Fundamentally, the situation in the listed companies is still the same with no major changes. Technical analyses will be critical because the UAE index and listed stocks are coming near their support levels and any break down in these levels will lead to increasing selling pressures," Al Husseini said.
"Buying powers are still weak and we expect the situation will continue for some weeks, so buying trend will have minimal impact on the UAE indexes. Selling pressures will be critical during the fluctuations in the indexes. Any break through support levels in DFM at 1,540 and ADX at 2,250 will lead to more selling pressures in the markets," he added.
Shiv Prakash, Technical Analyst at Mac Capital Advisors said that the DFM might continue its bearish trend during the next sessions. "DFM could not give breakout on the resistance channel near 1,800 points and fell sharply, breaking 1,700 supports and looks to see the continuation of the bearish move towards previous low levels of 1,550 in the descending channel formation."
"Earnings season has just started and further downgrade in the earnings can create pressure on the markets. Real estate stocks are again facing another round of selling. In these falling markets one should hunt good fundamental stocks, which are not showing steep fall and are closer to the supports with low private equity multiples and thus one can get handsome rewards in the long run," he added.