The South Africa 40 cash index confirmed the downside breakout alluded to last week, trading past the downside target of 43850 and finding support around the 43750 level before rebounding sharply once more.
The downside move represents the first significant pullback from the strong run we have had since mid-October 2014 as well as the first real pullback in price since the break of the inverse head and shoulders pattern (labelled L,H & R).
As mentioned last week, with the strong run we have had and while the inverse head and shoulders (IHS) pattern remains in play, a long bias remains favoured in the current market conditions.
The price is testing resistance at 45390 and breakout traders may wait for a confirmed close above this level before commiting to a move towards the IHS target projected at 46500.
Traders favouring an entry into weakness may look to accumulate near channel support (should a pullback occur) at 44300, targeting a move back to resistance at 45390, with a close below 43750 considering the failure of this move.