The Dubai Financial Market (DFM), which reopens today after a long weekend, is expected to see an upward trend in the short term as a result of rise in liquidity and the increasing ability of brokerage firms to increase their credit to customers, say brokers and analysts.
The DFM main index closed at 5,405.44, up 56.98 points, on Wednesday, while the Abu Dhabi Securities Exchange (ADX) ended 45.57 points higher at 4,976.15.
Analysts say DFM will witness an upward trend during the first two sessions of the week and the 5,600-level can be broken with large trading value and volume.
While technical charts expect the DFM to go up towards 5,720 by August-end, support points are expected at 5,320/5,237 and resistance exists at 5,480/5,553.
For ADX, the technical's suggest support at 4,890 and the resistance areas will see rise to 5,100 levels.
"Brokerage firms will be able to increase their credit for their clients so we expect a new trend of increasing speculations that will push prices higher during the next sessions," said Motaz Al Demerdash, CEO of Sharjah Islamic Services.
"However, this upward trend will be limited and on the short term, for two or three sessions, before speculators will start a new trend of profit-taking. In general, the lack of strong liquidity and high trade value and volume is expected to dominate the general trading environment in the DFM," he added.
Mohamad Al Behiri, trading manager, Amana Financial Services, agrees low volume would characterise trading on both the DFM and ADX. "The GCC markets started the week with major losses. The Saudi stocks suffered major setbacks during the first day of trading and this will have psychological impact on investors. Also, foreign and institutional investors in the DFM and ADX were net sellers. This will continue to add more pressure on the negative sentiment."
Behiri said the DFM stocks would fluctuate during the next two sessions with some gains in the index, but it is expected to remain under the critical resistance level of 5,600 points. "The index tried several times during the last few sessions to hit the 5,550-5,600 range, but it remained under this level.
"The ADX also failed to reach the level of 5,150 points and there is increasing speculation on cheap stocks. This trend is expected to continue this week," he added.