UAE markets are seen making further declines in the coming days as a lack of positive catalysts spur investors to extend profit-taking ahead of first-quarter earnings.
Dubai's measure fell 1.6 percent to an eight-week low of 1,836 points on Wednesday. The index is still up 13.2 percent year-to-date and some company valuations are stretched, say traders.
A break below 1,860 points triggered what technical analysts describe as a double top, formed by the benchmark's February and March peaks. This pattern indicates it could drop to around 1,770 points.
"A medium-to-high probability entry signal to go short was given at 1,860 after the market completed a bearish trend reversal pattern," MENA Corp says in a note. "Only the upward break of 1,960 would cancel the bearish scenario."
Analysts say a further decline, however, would bring back bargain hunters as a medium-term bullish outlook on UAE equities is intact.
Dubai was dragged down by bellwether Emaar Properties , which fell 3.6 percent to AED5.07 on Wednesday. Its next supports are at 4.90 and 4.60, according to MENA Corp.
Most UAE companies will post first-quarter earnings around late April and trading is likely to be muted before then.
"In April, stocks might be lower on dividends payouts. The second quarter will be slower as we head into summer," says Amer Khan, fund manager, Shuaa Asset Management. "Returns may not be what you expect."