Shares of industrial stocks as a group have been underperforming the broader U.S. stock market all year thus far. In my eye this is somewhat of a leading indicator for what may be in store for stocks generally speaking, but for now I want to continue looking at stocks within the industrial sector for potential short side or two-way trading ideas. Shares of Waste Management, Inc. (NYSE: WM ) are currently wedged between two well-defined technical areas where traders and active investors can look to place trades.
WM Stock Charts
Click to Enlarge
Moving averages legend: red - 200 week, blue - 100 week, yellow - 50 week
For some perspective, let's start off with the bigger-picture multiyear chart of WM stock. Here we see that the trend higher since 2013 has been well defined. The low volatility rise in 2017 ultimately, however, led to an overshooting move to the upside by December of that year.
Not surprisingly given the stock market's generally high positive correlation, the overshooting rally into January 2018 also lined up with a similar move in the broader stock market.
The overshooting move since then has brought about a new and choppier environment for WM stock just like it has for the broader stock market. The two black lines nicely show that the constantly narrowing trading range finally became too tight by late 2017 and WM stock has since both overshot and undershot this range.
From this angle, the yellow 50-week simple moving average is one to closely monitor as it has provided support since February of 2018. In other words, a break and hold below there could usher in further downside, all else being equal.
Click to Enlarge
Moving averages legend: red - 200 day, blue - 100 day, yellow - 50 day
On the daily chart, we see that the aforementioned 50-week moving average also lines up with the red 200-day moving average as technical support, making the area around the $81 mark all the more important to watch.
At the same time, WM stock now has clearly defined technical resistance around the $85 mark, which is the upper blue zone on the chart where horizontal resistance lines up with both the 50- and 100-day simple moving averages.
Active investors and traders could look to play WM stock to the short side anywhere around the $84.50-$85.50 zone for a first downside target at $80. Any bullish reversal closing above the resistance zone on a daily closing basis would be a stop loss signal.
Check out Anthony Mirhaydari's Daily Market Outlook for May 9.
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