Last week's fall confirms a breakdown of the consolidation pattern

DUBAI, Mar 11 (Gulf News): The Dubai Financial Market General Index (DFMGI) dropped by 51.53 or 1.61 per cent last week to close at 3,157.45. This was the third consecutive week of losses and the sixth week out of the past seven that the index has closed lower. Market breadth confirmed the bearish performance as there were nine advancing issues against 27 declining, while volume reached a five-week high.

The DFMGI took another beating, falling to a 25-month low, the lowest weekly closing price since late-February 2016. Although not discussed in recent weeks, the consolidation pattern that has formed over the past couple of years, following the January 2016 bottom, is that of a complex head and shoulders top. Last week's fall confirms a breakdown of the pattern as the 3,195.49 support level was clearly broken, with the DFMGI closing at the low for the week (very weak close) and below that long-term support price level. Therefore, the head and shoulders consolidation pattern now takes on potentially greater importance.

Technically, the classic neckline (support line) identification was first broken five weeks ago. However, within the larger consolidation price structure there is a significant horizontal support zone around the 2016 low of 3,195.49. That price zone clearly acted as support on two separate occasions over a six-month period and therefore can be considered similar to a second neckline. Now that it's clearly busted there is greater confidence that a bearish trigger of the pattern has been confirmed.