SA40 moving into overbought territory

Overbought signals in an uptrend serve as a warning that the current upwards move might becoming a bit overheated in the near-term.

The SA40 index has traded through our initial resistance target at 40015 and is now continuing towards our favoured target at 40700, as the price moves into new high territory.

The short, medium and long-term trends remain intact at this stage but we are however moving significantly into overbought territory as per our Stochastic indicator at the bottom of the chart.

Overbought signals in an uptrend serve as a warning that the current upwards move might becoming a bit overheated in the near-term rather than a signal to trade against the prevailing trend.

Should a pullback occur, the previous closing and intraday highs at 39800 and 40015 could provide opportunity for trend followers to participate in the uptrend, while a break of these levels would consider 39000 as the next level of support.

South Africa 40 index - 22 October

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.