Dubai Financial Market is likely to test its support level at 1650 points early this week before being able to bounce back to its resistance area.
"The DFM gave some strength indicators last week as it could stop the down trend and bounced up shortly before it continued down side," said Ahmed Abdul Rahman, head of research at Amanah Financial Services.
"The 1650 can play as a significant support level this week and we expect the market will test it in the coming two sessions. Though selling pressures continued in the markets, buyers are seen when the index touches its support levels and we expect buying interests will fuel at the support level, which will help DFM to move sideways around this area," he said.
Rahman said the DFM was still weak and the expected bounce would face resistance at 1710 points, which would need strong turnover. "Though we expect some buying, the interest is still weak due to uncertainty and lack of strong local news that can push prices higher. The market will continue to follow the trend in global and regional market, especially movements in the US and Saudi Arabia's stocks."
"The turnover declined sharply by almost 50 per cent last week compared to the previous week with 1.1 billion shares worth Dh1.6 billion changed hands during the week. Deyaar was the most active stock by volume with more than 200 million shares changing hands, 17.6 per cent of the total value, while Emaar was the most active by value with shares worth Dh411.6m changing hands, 26 per cent of the total value. Both stocks fell sharply last week by nine and 15.4 per cent respectively and this created pressures on the real estate sector and the DFM index, which lost 139.27 points, 7.65 per cent," said Rahman.
He said the continuous decline in turnover would affect any bounce in the market as trade values should return to test the Dh1bn to give confirmation for a change in the trend in the market.
However, Taimur Saadat, a senior analyst at Arab Capital Markets Resources Centre, sees the current trend in the market as a natural correction after global and regional markets rallied sharply in the past two months.
"The sentiment is very negative due to uncertainty about earnings. This sentiment may drag the DFM index down 20 per cent during the coming three to four months. We are in a long-term bear phase, which will end later this year. However, the market is oversold and the correction during the past two weeks already discounted negative expectations about earnings during Q2 this year."
Saadat expected the real estate sector would remain volatile and weak and this would continue negative pressures on the DFM index.
In the capital, the Abu Dhabi Securities Exchange is expected to continue its calm and slow down trend due to the deep shortage in liquidity and lack of buying interest.
"The ADX index closed at 2589.07 points, very near to its important support area of 2550-2560 points which we expect it may test it very soon," said Rahman.
"The index was moving gradually in the down channel last week and we expect this behaviour to continue this week as there were no signals of significant buying in the market," he said.
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