South Africa 40 Cash Index forecast: price action ahead of key macro data
In this article we look at different price action set ups for the South Africa 40 Cash Index ahead of a news heavy week.
The South Africa 40 Cash Index has now started to retrace off resistance at 74600 and from overbought territory.
As suggested in previous weeks, our preference has been to look for long entry into the pullback on a bullish price reversal closer to either the 71780 or 69520 support levels.
Shallow pullback & long entry criteria
The candle marked with the black arrow (hammer) does however provide the suggestion that a shallow pullback might have ended already.
For confirmation that we are in fact ending the pullback and resuming the longer-term uptrend we would like to see a positive close on today’s candle and ending above the open of the preceding candle. This would equate to a bullish engulfing pattern.
In this scenario, 74600 and 75250 provide our initial upside resistance targets, while a close below the (hammer) low at 73250 might be used as a stop loss consideration.
Deeper pullback scenario
Should we not get the bullish price reversal confirming today our expectation is for either a deeper pullback or sideways consolidatory environment.
Should a deeper pullback start to manifest we would not be looking to short the index, but rather wait for a bullish price reversal closer to either the 71780 or 69520 support levels for long entry.
In the event of a consolidation forming, we would wait for a breakout before assessing the next directional move.
News to watch out for
Today (Wednesday 1 February) does present a risk event in the form of a US rates decision and Federal Reserve commentary (8pm). This is followed by monetary policy decisions from the European Central Bank (ECB) and Bank of England (BOE) tomorrow (Thursday 2 February). Friday (3 February) sees US employment and Non-Farm Payroll data as further potential catalysts for market volatility.
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