Whether Trump or Clinton wins the presidential election, the Mexican peso's worst days are over, and a new day is about to dawn for the currency.
That may not be the conclusion of TV pundits or emotional traders reacting to the latest news, but it is the conclusion of the kind of comprehensive technical analysis provided by our decision support engine. You're safer following the DSE. (You can join our Trading Room or follow our DSE Alerts (@DSEliveTrader) services for a two-week free trial.)
Take a look at the monthly bar chart below. It shows the most-liquid futures contract for the Mexican peso vs. the dollar.
Notice the rising bottoms in the long-term stochastics vs. the lower lows in prices? That is a bullish divergence buy signal, and implies a break above the higher blue downtrend line, and a move toward at least the higher green line near 0.065. There is more bullish potential thereafter, toward 0.095 as well.
Click here to see the following chart in a new window
Once this long-term buy signal has been set up, we look for the trigger, which is the red stochastic crossing up above the green one. That just happened. Then, we look for an impulsive structure off the lowest low, which can be seen now on the shorter-term fractal of the daily bar chart (not shown here). If accurate, then any decline that comes in the next few days should hold above 0.050.
When our historical pattern-recognition algorithms spot setups like this, it usually means that some news is about to arrive to justify a dramatic change the the crowd's perception of the security or currency in question. What that news is matters little. What matters is that the trend is about to change.
Therefore, if you have been short, or are thinking of selling to speculate on a Trump presidential victory and its impact on the Mexican currency, this is not the time for that bet.
Rather, our objective DSE warns that selling actions are no longer indicated, and buying actions are. If you're short, exit your positions and bank your profits. At the very least, use buy stops at 0.054 to exit. If you're flat, those parameters can be used to get long. And, if you're long, hold or add to your positions.
Selling here is an emotional, subjective, late-joining action. These kinds of actions are highly correlated with losing outcomes. To skew your outcomes away from losing, and toward consistent winning outcomes, consider using objective early actions.
For updates on this analysis, as well as other trading opportunities, try our DSE Alerts service for free for a couple of weeks, or contract us at firstname.lastname@example.org
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.