Qatar Market in Overbought Territory

The Qatar market continues to advance higher.  The QE Index is up 9% since the 2022 World Cup announcement on December 2nd.  Clearly there's a lot of optimism surrounding Qatar at the moment.

However, the Relative Strength Index (RSI) is signaling that the Qatar market is in overbought territory.  For those not familiar with the RSI see here.  In short, the RSI is a momentum measure that oscillates between zero and 100.  When the RSI is below 30 this signals that the stock or index is oversold.  When the RSI is above 70 this signals an overbought stock or index.

That chart below shows the QE Index (top chart) along with the 14-day RSI indicator (bottom chart).  The green shaded area represents oversold RSI levels and the red shaded area overbought levels.

As you can see, the RSI for the QE Index is currently above 80, well into overbought territory.  Does this mean a big sell-off is imminent?  Not necessarily. When a stock or market does get this overbought it is certainly vulnerable to a sizable sell-off.  For example, the first two overbought occurrences highlighted on the chart above resulted +10% market falls.

But more recent overbought levels have just been met with a pause or mild pullback prices. So, on its own, a high RSI level isn't a reason to sell (especially when the weekly market analysis of the Qatar market is so bullish).  However, entering the market at such overbought levels probably isn't a good idea either and certainly wouldn't provide a good risk-to-reward trade.

At the very least when the RSI level for a stock or index is above 70 this should be taken as a "proceed with caution" signal.  With that in mind below are the Qatar stocks with the highest current RSI levels.

Enjoy.

Highest Relative Strength UAE Stocks

It has been a good start to September for stock holders in the UAE with the Dubai market advancing 11% and the Abu Dhabi market 4.3%.

Below are two tables showing the top ranked Dubai and Abu Dhabi stock by relative strength.  For information on how to interpret these tables please refer to this previous post.

In Dubai it's Aramex and DFM that have best combined relative strength across the 20, 50 and 100 day time frames.  In Abu Dhabi, ADCB, Dana Gas, RAK White Cement and United Arab Bank are all at the top of their 20, 50 and 100 day trading ranges.

Also provided below are the complete relative strength rankings for all UAE stocks.

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Enjoy.

Saudi Stocks: Relative Strength

Most of the analysis I've posted so far has concentrated on the market or index level.  Knowing what the broad market is doing is important but I also want to provide sector and stock level analysis as well.  Now that I have my historical share price database in working order I can start doing this. 

In this post I'm going look at Saudi stocks and introduce a simple relative strength study that can be used to quickly evaluate the how strong or weak recent price action has been for a particular stock.  It can also be used to compare the relative strength/weakness between stocks.

The study compares the current price of a stock to the  previous 20, 50 and 100 days price action.  Specifically, the current price is ranked between 0 and 100 according to the 20, 50 and 100 day price ranges.  For example, if the current price of a stock was $47 and this was the highest price for that stock over the last 20 trading days the resulting ranking value would be 100.  However, if $47 represented the lowest price over the last 20 trading days the ranking would be 0.  A ranking value of 50 would signify that the current stock price was in the middle of the price range over the last 20 trading days.

The chart below shows the last 100 trading days for Saudi Hollandi Bank.  The three yellow triangles mark the stock price 20, 50 and 100 trading days ago.  The red circle highlights the current price of the stock.  The 50 day price range is also show on the chart.

As can be seen, the current price is the highest price during the last 50 trading days.  The same goes for the current price versus the 100 and 20 day price ranges.  Is this example the ranking of the current versus all three historical price ranges would be 100.

And below is how the same information is presented in the relative strength study:

The three red-to-green spectrum bars correspond to the three time periods; 20, 50  and 100 days.  The dark blue diamonds mark the ranking of the current price versus the historical ranges. For Saudi Hollandi Bank all three diamonds are positioned to the far right indicating that the current price is in the highest portion of the historical ranges.

This is a stock that has clearly demonstrated significant price strength over the past 20, 50 and 100 trading days. This strength is captured in the "Rank" column above.  The highest ranked stocks are those that have achieved the highest combined relative strength across the three trading ranges compared to other Saudi stocks.  That Saudi Hollandi Bank has a ranking of 1 tells us it is currently the strongest performing Saudi stock.

Here's another example for The National Shipping Company:

In this case the diamond is in the middle of the bar for the 20 day price range indicating that the current price is in the middle of that range.  For the 50 and 100 day ranges the diamonds are positioned towards the left end of the bar indicating that the current price is in the lower portions of those ranges. 

The National Shipping Company has a ranking of 98.  Given that there are about 150 Saudi stocks (in my database, that is) this ranking suggests that The National Shipping Company is one of the weaker performing stocks.

So, this study shows the relative strength of a stock (how the current price of a stock compares to its historical price action) and how that relative strength compares to other stocks. At the end of this post is a complete list of relative strength data for all Saudi stocks. Below, however, are the ten current highest and lowest ranked relative strength Saudi stocks:

Of course, knowing the stocks with the highest and lowest relative strength is one thing but how do we use this information? Do the highest ranked stocks continue to perform strongly? Or is it best to buy the weakest stocks in anticipation of a rebound?  In future posts I'm going to cover stock rotation strategies which will be aimed at answering these types of questions.

That's all for now though.

Enjoy.

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