Regarding your USD/MXN short:
I like this for the most part. Just be aware:
- If you plan on holding for longer than a week, NFP is on Friday.
- The Peso has shown some some good strength off the 2/2014 highs- sellers have been pretty much in control for 3 months. On top of this, a supportive trendline was broken, retested and held as resistance heading into the close of April. Although there is some current support at the level the pair closed @ on Friday, I don’t think this level is going to hold.
Just looking @ price action from the swing high on the D1 on 4/28 forward: Sellers have been in control 60% of the time. The closes on the bearish candles have been @ / near the lows of the day. The closes on the bullish candles are primarily printed well off the highs of any intraday rally and attempt to bring prices higher.
Furthermore, a major red flag to me is how embedded the 14,3,3 STOCHASTICS indicator is- 17 days in oversold territory. This is a contrarian signal, i.e. potential further weakness ahead. Although there is some bullish momentum divergence on the H4, look how many times the indicator and price has diverged, yet continued to sell off.
Think about it- a major trendline (also a channel floor) which held for literally over a year was just recently broken to the downside, retested and held as new resistance. This is a significant event.
I guess it depends on your timeframe, and how long you plan to stay in the trade. If it’s longer term- pull up a weekly…There were 4 consecutive W1 PinBars printed. From the 1/2014 highs, sellers have been in control nearly 70% of the time. What does this communicate about the imbalance in the market between supply and demand (i.e. sellers and buyers)? 12.85 is clearly a very important price point for this pair. Given the current read on price action, I’d say that personally I’m neutral / bearish. But, that’s just my opinion.