South Africa 40 Cash Index Posts Sharp Rebound from Downtrend

SA40 Cash Index

In a dramatic turn of events, the South Africa 40 Cash Index, after trading nearly 2000 points lower from open, managed to offset losses and close the day (4 April 2018) back in positive territory. The candle circled red is commonly known as a “Hammer” formation and highlights the intraday price reversal.

The index price has also closed back above the 48400 level, which means we are currently not looking for short entries anymore, but rather sit in a neutral positioning for now. The neutral positioning is a preference as the rebound from oversold territory conflicts with the longer term trend bias which is still considered down.

However, traders who are contrarian and in turn are prepared to trade against the underlying downtrend, might look to 50239 as the next upside resistance target. Using a close back below 48400 as the failure level.

SA40 Cash Index (Previous)

The SA40 Cash Index has continued to decline since our last note and has now realised both downside targets from last week’s guidance. The lay of the 20, 50 and 200 day simple moving averages reminds us of the negative trend bias and reasons for having (and continuing) to look for short entries into the index. A confirmed daily price close below 46950, calls for a move to the next level of support at 45670. An intraday pullback towards 47730 could provide another short entry opportunity, while a close above 48400 would instead be indicative of a short term bullish reversal.