In the initial days of the week, the JSE Top 40 Index (JSE: J200) took a step back, retreating from its robust performance in the previous week, buoyed by the latest budget speech. The impact of the budget speech reverberated strongly, particularly on the South African Rand, which dipped to a near 4-month low. Analysts pointed to the negative repercussions of the 2024 national budget, dampening investor sentiment.
As the South African Rand weakened, there was a slight uptick in the equity market. However, this momentum was short-lived as the new week unfolded. In company-specific developments, Sasol experienced a dip of over 2% on Monday following its latest interim earnings report. Despite falling short of analyst expectations, Sasol bounced back impressively on Tuesday, surging by more than 5%.
Technical
On the daily chart, a descending triangle is in play, signalling the potential for a breakdown in the upcoming sessions. The 25-SMA (green line) has converged with the 100-SMA (orange line), suggesting neutrality in the short term, confirmed by the neutral RSI. Resistance at 67,445.89 could be in focus as we advance, a psychological resistance level near the 25-SMA and 100-SMA.
If the price clears this resistance sustainably on Tuesday, it could wane the fears of a breakdown occurring. The 50-SMA (blue line) could then be the final hurdle to cross for the index before it can retest the dynamic resistance of the triangle in the hope of a breakout, which could see it trickle higher toward the Fibonacci midpoint at 68,631.30, and the 61.8% Fibonacci golden ratio at a psychological supply zone near 69,879.31.
However, if the price remains below this resistance, the support of the triangle could become vulnerable at 66,229.46. A breakdown below this support could open a path toward 65,322.32, where the prior breakdown found support. To sustainably enforce the breakdown, the price may have to clear this level and move toward 64,703.82.
Summary
Following a strong finish to the prior week’s trading, the JSE Top 40 Index started the new week on the back foot. In the upcoming sessions, resistance at 67,445.89 could play a pivotal role in determining whether the descending triangle will break down or a trend reversal is on the cards.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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