The Tadawul All Share Index (TASI) bull trend is preparing for its next move higher following a pull back towards support. Support can be anticipated anywhere from last week’s low of 7,059 and down to approximately 6,870. The lower part of the range is from previous resistance (now potential support) at the swing high from April 2016. That high marked the top of a large double bottom trend reversal pattern.
Last November the TASI broke out of the double bottom pattern before finding resistance at 7,288 and subsequently moving into a multi-month consolidation phase that took the form of a symmetrical triangle. When combined with the rally off the October 2016 lows the overall rising pattern takes the form of a bull pennant. A decisive breakout of the bull pennant occurred six weeks ago with the TASI then rising to a 22-month high before hitting resistance and moving into a retracement, where it remains.
Upward momentum influenced by two bullish patterns
Having two bullish patterns trigger one after the other as the uptrend progresses, with measured targets not yet close to being reached, is very bullish for the general outlook of the Saudi Arabia stock market. When measuring the bull pennant we arrive at a minimum target of approximately 8,513, while the double bottom target is a little higher around 8,610. Keep in mind that given the size of the patterns from which the targets are derived, they should be looked at as long-term targets.