Over the last week, the South Africa 40 cash index closed above the high at 46400, and proceeded to rally past our resistance target at 46900. The blue circles highlight how the channel utilised in previous weeks (dotted parallel red lines) has been breached at both the support and resistance levels.
The channel has now been widened to include these significant turning points (solid parallel red lines). Currently, the price is pulling back from the recent all-time high. The pullback has not yet given signs of ending as the price continues to make lower highs and lower lows over the last two days. Horizontal support at 46400 is favoured, while the short-term retrace is underway, a break of which favours a move towards channel support at 45700.
The long-term trend remains up and short-term weakness is still not an indication of a trend reversal. Trend followers would look to the short-term retracement as an opportunity to join the long-term uptrend at the respective support levels indicated, rather than an opportunity to trade counter trend. The recent low at 45160 needs to be broken for a trend reversal to be considered.