* Investors look to cash in on previous session's rally
* Brazil Bovespa slips 0.25 pct, Mexico IPC down 0.09 pct
By Asher Levine and Rachel Uranga
SAO PAULO/MEXICO CITY, March 14 (Reuters) - Latin American stocks fell on Wednesday as investors sought to lock in profits the day after a rally on an improving U.S. economic outlook.
The MSCI Latin American stock index dropped 0.89 percent to 4,186.93, retreating below its 21-day simple moving average, which has provided resistance over the previous six sessions.
Brazil's Bovespa had hit an 11-month high on Tuesday after the U.S. Federal Reserve upgraded its outlook to say the world's largest economy was "expanding moderately." The Fed on Tuesday also announced that most of the largest U.S. banks passed their annual stress test, showing they had adequate capital to protect against losses.
Investors on Wednesday sold shares and locked in profits, driving the Bovespa down 0.25 percent to 68,225.84.
Mining giant Vale lost 1.47 percent, while OGX , the oil company controlled by billionaire Eike Batista, fell 1.69 percent.
"We had an exaggeration yesterday," said Joao Simoes, who helps oversee 570 million reais ($315 million) at Duna Asset Management in Sao Paulo. "With stocks like Vale rising 5 percent in one day, what's behind it to justify that? Not much."
Despite Wednesday's losses, a technical momentum indicator, known as the MACD, posted a bullish cross, suggesting the index could be ready to start a new rally.
"We are in a bull market," said Alexandre Ghirghi, a partner with Metodo Investimentos in Sao Paulo. "We may see some profit-taking along the way, but in the medium term the market is getting stronger."
Mexico's IPC index fell for the third session in four, losing 0.09 percent to 37,986.54.
America Movil, the telecommunications company controlled by billionaire Carlos Slim, lost 1.06 percent, while retailer Wal-Mart Mexico gained 2.1 percent.
The IPC has been trading near record highs and has gained about 2.5 percent this year, largely moving on upbeat economic data from the United States, Mexico's largest trading partner. Some analysts doubt, however, that benefits from expectations of an improved U.S. economy will be enough to lift shares beyond the short-term.
"The justification to convince the markets has not been fundamental," said Gerardo Roman, head of stock trading at Mexico City brokerage Actinver. "People are waiting to see more data to validate whether or not this rise is justified."
Chile's IPSA index gained for a fifth consecutive session, rising 0.33 percent to 4,544.17.
Regional energy group Endesa Chile rose 1.4 percent, while retailer Cencosud climbed 1.08 percent.