South Africa 40 Cash Index price forecast: overbought into new high territory
New high territory on the South Africa 40 Cash Index begets another overbought signal
The South Africa 40 Cash Index: Technical Analysis view
The South Africa 40 Cash Index has continued its uptrend, reaching our confluence of resistance (channel and Fibonacci extension) target at 74600. The index has however provided very little in the way of a new pullback for long entry.
Currently the index trades again in overbought territory.
Our preference remains keeping a long bias to trades on the South Africa 40 Cash Index, although we would like to find entry on a pullback from overbought territory rather than at currently elevated levels. A pullback towards either 71780 or 69520 would provide long entry consideration if accompanied by a bullish price reversal (candle pattern) at one of these levels.
We are not looking to short the index at current levels (even though overbought), in respect of the underlying trend bias.
Our longer-term upside resistance target has been revised higher to a confluence of levels at 75800.
Cash Adjustment expected
Traders are reminded that the South Africa 40 Cash Index will adjust for a dividend in the underlying on Tuesday the 24th of January. The cash adjustment is currently estimated to be around 11.2 points.
Key news events
In terms of upcoming news events which could have an effect on currency and equity markets this week:
26 January at 3pm sees the South African Reserve Bank (SARB) concluding its Monetary Policy Committee (MPC) and with-it amendments (if any) to local lending rates
26 January at 3:30pm also sees the Q4 and FY22 Advance Gross Domestic Product (GDP) data out of the US
27 January at 3:30 sees US Core PCE (Personal Consumption Expenditure) data released, a key measure of US inflation
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