Chart of the Day: Waste Management Sets Stage for Potential Move Higher
The stock has been moving sideways for two months after a strong run. Here's why that could be a good thing.
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After a substantial run higher you like to see a stock pull back, test an area for support and drift sideways for a period of time. That might last eight to 12 weeks, in fact the longer the better. As famed technician Louise Yamada once said, "The longer the base, the higher the space." That simply means the longer a stock can base and firm up support levels, the higher the stock will rise when the bulls start to accumulate.
Waste Management (WM) is the textbook case here, with a very modest range currently between $220-$235, an ideal situation before the next move, which we think will be higher. Notice in the chart on at least five occasions the lower end of the range has held firm. We'll call that the $220 area. Also, the average directional index (in the fourth pane) is drifting down toward zero.
This tells us the trend is weak, which is obvious as the stock chart shows no trend in the price action. But the money flow, as seen in the bottom of the chart, is starting to rise, which means big money is coming into the stock in this price range. Important. Also, the moving average convergence divergence is lining up here, already on a buy signal crossover.
We like Waste Management in TheStreet Pro Portfolio and rate it a "Two," stockpile on pullbacks.
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At the time of publication, the Pro Portfolio was long WM.
