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Even in a market that seems to be floundering ahead of an unusual (to put it mildly) presidential election, there are always stocks giving us nice technical setups.
One such stock is Waste Management (NYSE: WM), a waste collection and recycling company that also develops landfill gas-to-energy facilities in the United States. That puts the company in a sweet spot for environmental issues, renewable energy generation and general industrial activity in the economy.
On the charts, the stock scored a nice technical breakout through its declining trendline from June, as well as a move through its key 50-day moving average, although that is still preliminary.
The stock actually started to rally on Wednesday, ahead of the company's earnings report, which was released Thursday before the bell. Waste Management beat analyst expectations for profits and revenue, and while the stock closed down on the day, it is up nearly 2% for the week.
A bevy of indicators -- from relative performance to momentum to money flows -- turned higher to confirm the price move.
From what I'm seeing, it looks very much like a textbook example of a technical breakout that ended a short-term correction in a long-term bull market.
There are a few caveats, though, and they start with the broader market.
As I mentioned earlier, it seems that the stock market is directionless, and volatility is low as a new trading range develops.
In early September, the market, and specifically the S&P 500, broke down from one of the tightest trading ranges in decades in a move that should have been the start of a decent pullback. But that decline did not materialize, leaving the market and the index rather flat.
I'm also seeing more bearish technical setups in individual stocks than bullish ones across the majority of industries.
In the industrials sector, to which Waste Management belongs, I see several subgroups displaying weakened conditions. And a number of high-profile industrial stocks performed poorly after their Q3 earnings announcements, even when the news was good.
But in any market there are stocks that buck the trend, and the industrials as a whole are truthfully only lagging slightly. So, it is quite plausible Waste Management can defy the bears and move even higher.
To review, we have a trendline breakout with strengthening technical indicators and good fundamentals in a market that is neither helping nor hurting. The strategy is to buy the current breakout and let it develop. A move above resistance around $64, where the stock stumbled on Thursday, would be a good place to add to your position.
Finally, the stock throws off a 2.6% annual dividend yield and should go ex-dividend within the time frame of the trade. What's more, if you purchase at least 100 shares, you could collect anywhere from $50 to a few hundred dollars in extra income on the position in the next 48 hours.
Recommended Trade Setup:
-- Buy WM at the market price
-- Set stop-loss at $61
-- Set initial price target at $69 for a potential 9% gain in 10 weeks, plus income
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