Weekly Market Report
The Qatar Exchange (QE) Index gained 111.37 points, or 1.34%, during the week, to close at 8,442.51 points. Market capitalisation rose by 1.24% to reach QR462.8 billion as compared to QR457.2 billion at the end of the previous week. Out of the 42 listed companies, 32 companies ended the week higher, while 7 fell and 3 remained unchanged. Ahli Bank (ABQK) was the best performing stock with a gain of 9.05%; the stock is up 0.95% year-to-date (YTD). Doha Insurance (DOHI) was the top decliner, down 5.44%; the stock is still up 18.76% YTD.
European markets continued their outperformance on a month-to-date basis, while the looming fiscal cliff crisis continued to be a drag on US equities. In the Eurozone, S&P raised Greece’s sovereign credit rating to B-minus (with a stable outlook) from selective default. The ratings agency cited strong determination on Europe’s part to keep Greece in the Eurozone as a key driver behind the upgrade. Moreover, the European Central Bank (ECB) reopened the path to cheap financing for Greek banks by allowing the country’s sovereign debt to be used as collateral in ECB funding operations. In other developments, the Bank of Italy confirmed that it could weather the current crisis without seeking assistance from ECB’s bond-buying scheme. However, it was not all rosy for Europe as S&P downgraded its outlook on Britain’s triple-A rating to negative citing weak economic recovery and an insufficient improvement in public finances. Further, as its early December minutes revealed, the Bank of England (BoE) was of the view that the UK economy was likely to remain stagnant over the near term, with inflation expected to exceed 2% next year. Turning our focus to the US fiscal cliff issue, optimism regarding an agreement before year-end somewhat faded on Wednesday with the White House rejecting the House of Representatives Speaker John Boehner’s “Plan B” proposal. With time running out regarding a potential deal, Fitch warned that the US might lose its triple-A credit rating status.
On the regional front, Saudi Arabia was the best performing market with the benchmark index gaining 1.8%. Qatar was the second best performer, with the QE Index up by 1.3%. The index was boosted by gains in Industries Qatar (IQCD), up 1.90% because of investor optimism regarding its fourth quarter earnings. Also, QTEL’s 3.38% increase as a result of positive comments by Moody’s and confirmation by its subsidiary Asiacell to list on the Iraq Stock Exchange boosted the index.
Equity trading value during the shortened trading week (4 days) fell by 9.30% to reach QR668.1 million, compared to QR736.5 million in the prior week. The Banks and Financial Services sector led the trading value during the week, accounting for 46.06% of the total equity trading value.
Equity trading volume decreased by 3.88% to reach 13.09 million shares, as against 13.62 million shares in the prior week. The number of transactions decreased by 15.18% to reach 9,133 transactions versus 10,768 transactions in the prior week. The Banks & Financial Services sector led the trading volume, accounting for 45.19% of the total.
Foreign institutions were net buyers to the tune of QR57.3 million in equities during the week. Qatari institutions and non-Qatari individuals were net sellers.
Technical analysis of the QE index
The QE Index ended last week with a bullish resolution as it closed at its week’s high of 8,442.51, managing to break past a prior high of 8,379.87 (near its 21-day moving average). The price action on Wednesday and Thursday was largely responsible for the gains during the week with the index advancing more than 1% over the course of those two days. At present, the index is trading below its major horizontal resistance line at 8,450.0, which is also in proximity to its 55-day moving average (currently at 8,457.82). A rise above this level could imply additional upside. Further, resistance is seen at 8,615.84 (November high) and 8,648.39 (September high). On the other hand, a drop below the 21-day moving average (currently at 8,376.81) has bearish implications and provides a downside target around the 8,316.0 level. If that level is breached, the next downside target is at 8,220.0, followed by the 52-week low of 8,123.02. However, the index has support for a further upward move from the Relative Strength Index (RSI), which has crossed the midline toward the bullish territory. Further, the Moving Average Convergence Divergence (MACD) could also see a positive divergence if the index moves higher this week. Moreover, the recent volume spike is revealing the underlying strength supporting this move.
Definitions of key terms used in technical analysis
RSI (Relative Strength Index) indicator – RSI is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between 0 to 100. The index is deemed to be overbought once the RSI approaches the 70 level, indicating that a correction is likely. On the other hand, if the RSI approaches 30, it is an indication that the index may be getting oversold and therefore likely to bounce back.
MACD (Moving Average Convergence Divergence) indicator – The indicator consists of the MACD line and a signal line. The divergence or the convergence of the MACD line with the signal line indicates the strength in the momentum during the uptrend or downtrend, as the case may be. When the MACD crosses the signal line from below and trades above it, it gives a positive indication. The reverse is the situation for a bearish trend.
Candlestick chart – A candlestick chart is a price chart that displays the high, low, open, and close for a security. The ‘body’ of the chart is portion between the open and close price, while the high and low intraday movements form the ‘shadow’. The candlestick may represent any time frame. We use a one-day candlestick chart (every candlestick represents one trading day) in our analysis.
Doji candlestick pattern – A Doji candlestick is formed when a security’s open and close are practically equal. The pattern indicates indecisiveness, and based on preceding price actions and future confirmation, may indicate a bullish or bearish trend reversal.