“They don’t ring bells at the top.” -old Wall Street axiom
Dating back to August 2011 here, September 2011 in this blog post, and then April 2012 in this post, we looked at the country of Mexico and some of its prominent ADR’s (FMX and KOF, most notably) trading in America as viable long-term opportunities. The interesting part of Mexico’s strong and established uptrend is that it is almost an affront to the news stories that have been released south of the border over the past several years, complete with drug cartels owning entire Mexican cities, innocent civilians, prominent public officials and law enforcement officers being executed on a consistent basis, and an overall drumbeat of murders and mayhem. So, there was an embedded wall of fear and an extreme sense of disbelief or even condescension in terms of and against making a long-term bullish investment in Mexico.
Last March, however, I noticed that more and more American traders were starting to catch on to the fact that the Mexican market was “breaking good.” That shift in sentiment aligned with steep technicals, albeit still in an overall strong uptrend.
In my post, “Mature Mexican Rally,” on March 27th, I noted that:
…(on) the Mexican benchmark’s monthly chart…we have a mature rally on our hands, with a potential warning sign after a fake-out, or throw over, above the rising wedge pattern going back several years.
I’d start to look at fading any late-to-the-party Mexico bulls here.
Updating that monthly chart for the Mexican benchmark, first below, you can see the rising wedge throwover proved true, with the head-fake higher and reversal back down below the bottom of the wedge. Bulls will argue this is a simple flag within an overall uptrend before we head on higher. But ADR’s like KOF are particularly vulnerable here to breaking down further.
And if you are looking for a (liquid) way to play further weakness, consider shorting the EWW, country ETF for Mexico. The second chart below shows the daily timeframe, vulnerable to further downside if $71.70 is lost.
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Chess one thing to note here is if you haven’t already dig deep down into the index weakness and you’ll find a lot of housing related weakness. The reason is that a previously “safe” builder Geo purposely defaulted on some debt in the last month and it caused massive panic in the entire sector. Few friends and I got in on some Homex debt which was unrelated but traded down to 60 and shorted a smaller notional amount on the ADR as a cram down play or a hedge before Carlos Slim came in and bought their prison business.
Not saying technicals aren’t what they are of course but there’s been a little bit of event risk if you haven’t been paying super close attention to LatAm.
Thanks, geckler. That is great stuff. I agree there could be rotation down there and Slim is an X factor.
Ha, nice Breaking Bad Lego guy and reference.
Thanks!
American Capital Agency Corp. [AGNC] to Ring The NASDAQ Stock Market Opening Bell
(Hahahha..;)
Well, they’re taking it down, it continues it’s sell off today.
Even if they were to cut their yield in half it would still be pretty darn good. I’ve managed(stated in buried post) to capture plenty of this yield over the years..
(Annualized Dividend Yield 16.64%)
I’m adding here..why not?
follow uo on a carry over trade(via pickr) and speaking of dividends..
I tried to post about WARNER CHILCOTT PLC COM on Friday’s pop over on RC’s blog..
locked out..oh yeah!!
I know that SnoozeMr roams these halls of ibank and we had chatted about this issue back in mid Dec.(me being a buyer at the time..and he thinking it would sell off after Divi exp..this time is different SNOOZE..)
I did sell some of those shares acquired @ 10.94
continue to hold a portion at above entry and added shares
Acquired 03/21/2013 @ 13.56
good enough..
Torn(principles) holding shares(?) from long ago..
Monsanto Wins Seed Case as High Court Backs Patent Rights
By Greg Stohr – May 13, 2013 12:16 PM ET
http://www.bloomberg.com/news/2013-05-13/monsanto-wins-seed-case-as-u-s-high-court-backs-patent-rights.html
closed position from 2011 @66.33
Status Filled at $107.57
Symbol MON
Description MONSANTO CO NEW
Order Date 05/13/2013, 11:38:18 AM ET
The volcano isn’t going to help the EWW either.