South Africa 40 Cash Index price reversal in news heavy week

South Africa 40 Cash Index

Since our previous note, the South Africa 40 Cash Index broke the 66250-support level, before forming a bullish reversal off the 65040 level.

The bullish price reversal has been strong enough to produce a close back above the 66250 level. This move has also been accompanied by a move out of oversold territory. The current price action suggests the move higher to be continuing with 68515 the next upside resistance target. Traders who are long might consider using a close below the low at 65765 as a stop loss indication.

The relatively tight stop loss considers a news heavy week in which markets still await US Advance GDP, PCE Inflation, local CPI inflation, the ECB rates decision as well as the SARB rates decision.

Large cash adjustment expected

Traders will also want to note that the South Africa 40 Cash Index will adjust for a dividend in the underlying index on Tuesday the 23rd of January, currently estimated to be around 219.7 points.

South Africa 40 Cash Index (previous)

A fresh look at the South Africa 40 Cash Index in the new year (2024) tells a similar story that of the past year (2023), which is that the index remains in a broad rangebound trading environment.

The rangebound price environment on the South Africa 40 Cash Index continues to suggest long or short positions are permissible in the absence of an up or down long-term trend bias.

Previously guided levels (from 2023) on the SA40 Cash Index have been adjusted and simplified to renew the relevance of support and resistance considerations for the local benchmark.

The price of the index is currently moving to test support at the 66250 level, whilst trading in oversold territory.

Long trade entry and risk scenario

Traders looking for long entry might prefer to see a bullish candlestick / price reversal before the 66250 level, accompanied by a move out of oversold territory. In this scenario, a close below the 66250 level may be used as a stop loss consideration, whilst targeting a move back towards resistance at 68515.

Short trade entry and risk scenario

Should the price not manage to form a bullish reversal before the 66250 level and instead move to close below, a downside breakout would be considered with 65040 the next support target. In this scenario, traders may be hard placed to find short entry as the index lies deep within oversold territory already. However, those choosing to find short entry into such a move might consider using a close above a one or two day high as a stop loss indication.