After finding a few days of support on the 44460 breakout level, the South Africa 40 cash index has drifted lower to the trend line support (dotted black line). Bullish reversals over the last week have failed to hold up and there have been no significant gains to follow.
The extension of the pullback suggests a weakening of the upward move. Due to this occurrence, rather than waiting for a bullish price reversal before committing to further gains, a breakout methodology is favoured. A close above the blue channel’s resistance line considers the breakout favouring continued gains to 46500.
In this scenario, the short term low of the current pullback would be used as a failure level. Should a breakout not occur and the price drift lower to close below 42900, renewed downside becomes favoured with the initial support target considered at 42030.
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