The South Africa 40 cash index traded through the initial downside target last week (45440), but failed to reach the target projected from the triangle.
The price rebounding and closing above 46200 recognizes the failure of the initial move down and the triangle target is no longer deemed valid. Although the downside move has been disrupted, faith in the resumption of the uptrend has not yet been renewed.
The price now trades in the middle of a medium-term consolidation between levels 45050 (recent low) and resistance 47160 (all-time high). “L, H and R?” label what could be a head and shoulders pattern forming.
To confirm this pattern, a price reversal would need to confirm before reaching the all-time high at 47160, followed by the price closing below the key support (recent low) at 45050. The possibility of the head and shoulders formation serves as a warning.
With this in mind, awaiting a breakout to confirm a trend continuation (above 47160) or reversal thereof (below 45050) is preferred to range trading the current price consolidation environment.