The contrarian trade suggestion, although not our preferred scenario, was the correct trade from the previous note (below). The index has continued to rebound and found resistance by the 50239 level, which was also the upside target for the rebound. The red channel highlights the move up which could be setting up as a bear flag formation. Despite the rebound we still consider the trend bias for the index to be down. The move higher has also moved the index back into overbought territory.
For a short entry confirmation signal, we are looking for a break below the lower support of channel (currently 49700). A close below this level, considers 47730 as the next support target. In this scenario a close above the 50490 might be considered the failure level for the trade (should it confirm).
SA40 Cash Index (Previous)
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