We looked at Action Alerts PLUS holding Waste Management. Inc. (WM) in late October and I wrote that, "WM is clearly in an uptrend and we have higher price targets. The only question is where to add to longs and what to risk. WM might make a very short-term consolidation pattern like a flag or a pennant in the $82 area. Aggressive traders should use this temporary pause to add to longs. A close below $76 would break the short-term uptrend and that would be my risk level. On the upside we would set our sights on the $98-$100 area."
We did not get to our price target but not a bad forecast considering. Now that prices corrected and held the rising 200-day moving average line a fresh look is needed.
In this daily bar chart of WM, below, we can see how prices quickly cascaded lower earlier this month only to briefly test and hold the rising 200-day moving average line. What is really interesting to me is that while volume was heavier that it was in January the daily On-Balance-Volume (OBV) line did not decline much and has since turned up again -- it looks like traders bought the decline.
The Moving Average Convergence Divergence (MACD) oscillator is well below the zero line but it looks like the two moving averages that comprise this indicator have begun to narrow. A cover shorts buy signal could happen soon.
In this weekly bar chart of WM, below, we can see that prices touched the rising 40-week moving average line and has rebounded. The weekly OBV line remains in a three-year rise and the MACD oscillator crossed to a take profits sell signal.
In this Point and Figure chart of WM, below, we can see an $87 price target.
Bottom line: It looks like WM can rally back and retest its January highs. Hold longs and risk a close below $80 now (up from $76).