The South Africa 40 cash index is currently testing last week’s initial resistance target at 47540. The momentum is reaffirmed as bullish, although a close above 47700 is needed before the next target of 48460 is considered. More importantly, above 47700 the larger head and shoulders mentioned in previous weeks loses its relevance. The index is overbought at the current resistance level whilst forming an intraday bearish candle at present.
Should the current resistance level hold up and the price start to retrace towards the neckline of the Inverse Head and Shoulders pattern (labelled L, H & R), those trading in line with the bullish trend emerging might consider long positions. If the price does however retrace below the 45850 level, the short-term bullish momentum would be deemed to have failed.
Click here to view South Africa 40 chart