South Africa 40 Cash Index price forecast: negative divergence warning
The negative divergence signal off resistance and from overbought territory suggests some downside to follow.
South Africa 40 Cash Index
The South Africa 40 Cash Index has produced an upside break of the 65100 to 66450 range following our last note. However, the speed and size of the move higher provided little opportunity for long entry as it closed at the 7580-resistance target.
The price has since found further resistance at the 68970 level and started to reverse while showing a negative divergence with the stochastic indicator. The divergence is highlighted with the dotted red lines on the chart, which shows higher highs on the South Africa 40 Cash Index price relative to lower highs on the stochastic oscillator.
The negative divergence signal off resistance and from overbought territory suggests some downside to follow. Traders who are short, might target a move back towards the 66450-support level, while using a close above resistance at 68970 as a stop loss consideration for the trade. Traders looking for extra confirmation before entering new short positions might prefer to first see a close below the 67580 level.
No cash adjustment expected
Traders will note that the South Africa 40 Cash Index is not expected to adjust for a dividend in the underlying this week (commencing 20 November 2023).
South Africa 40 Cash Index (previous)
The bearish reversal (circled blue) from overbought territory highlighted in our previous note did confirm, resulting in the South Africa 40 Cash Index trading to the 65100-support target.
The price now trades within a narrow range between levels 65100 (support) and 66450 (resistance).
Traders might wait for a break of one of these levels before considering a new directional trade.
When the breakout scenario presents itself, we will update our view with targets and failure levels.
No cash adjustment expected
Traders will note that the South Africa 40 Cash Index is not expected to adjust for a dividend in the underlying this week (commencing 13 November 2023).
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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