SA40 possibly favouring 41250 level

The South Africa 40 index consolidated for most of the week before trading directly to our resistance target at 40700.

The price of the SA40 index has now pulled back marginally on an intraday basis, and is testing the resistance of the range formed around 40650, while attempting to confirm a breakout.

Should the breakout confirm with a close, the height of the consolidation projected from the resistance arrives at our favoured target of 41250.

The Stochastic remains in overbought territory, warning that the recent upward move may be overheated; however it does not suggest trading against the trend. Oscillators such as the Stochastic can remain overbought for quite some time in a significant uptrend and should only be used to confirm a reversal in price (which has not yet occurred in this case).

South Africa 40 index - 29 October

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