The South Africa 40 cash index traded through the initial upside target from last week at 47400, but has not yet realised the second upside target suggested at 48500. The price has instead consolidated into a pennant formation, which is essentially a small triangle consolidation. Pennant formations highlight a brief pause in the directional move and are considered continuation patterns.
These patterns are referred to as continuation patterns as they have a habit of forming before the trend, which preceded (which in this scenario is up) is continued. A breakout can however occur in either direction and it is considered prudent to wait for a breakout before committing to a short-term direction. Should a downside breakout occur, trend followers might wait for weakness to play out before looking for long entry around levels 46175 and 46600.
A close above the resistance of the pattern would also favour renewed gains. The upside targets favoured in both scenarios are considered at 48500 and 49120, the latter being the projected target from the pennant formation. Should weakness ensue and the price close below support at 45950, the bullish momentum would be considered to have failed for the time being.
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