The South Africa 40 index broke below the support of last week’s range and has now returned back to retest the level (42200).
The short-term trend is now considered down, while the long-term trend remains up (price continues to trade firmly above 200MA). Should the price close above 42200 (previous support and current resistance) as well as above our dotted trend line labelled 1, a move towards 43100 is favoured.
Should the price find resistance at 42200 by failing to close above this level, 41400 (recent low) becomes the favoured near-term target, a break of which sees the next support level from our dotted trend line labelled 2 favoured at 41000. Due to our long-term trend remaining up, trend followers would look to the first scenario for a possible long entry, or wait for an opportunity for a long entry should the short-term weakness ensue as with the second scenario.
The dotted trend lines also highlight what could (not confirmed) be a falling wedge pattern, which we will monitor over the coming weeks should it become relevant.