NEW YORK (Real Money) -- It might be time to dump Waste Management (WM) stock into the trash. While WM is just a bit higher Tuesday, I have grave concerns for any close under $47.50. The stock is playing a dangerous game here with the descending triangle and has already lost support at $48. A move below $47.50 would immediately target $45 per share.
Momentum is stuck in a similar wedge pattern, with the relative strength index (RSI) stuck in the 30s. Furthermore, the strength of the trend is very high as evidenced by the Average Directional Index (ADX), which is currently over 40. Oftentimes traders look at 20 or 25 as the key for a trend to be considered strong and WM is sitting at twice that 20 level. Until that trend weakens or the stock closes over $48.50 for consecutive days with an RSI pushing over 50, there are simply better places for your hard-earned dollars.
Pushing out to a longer view, WM looks like a candidate for the very low $40s over the remaining course of the year. Again, we can see the support at $47.50, but there is also a bearish head-and-shoulders pattern pointing to $42.50 on the downside. Long-term momentum and trend are very bearish. The RSI shown is a 13-week moving average, so not one to swing higher in quick fashion. Anywhere under 50 has not been a place to own.
We can see similar patterns in both the moving average convergence divergence (MACD) indicator and slow stochastics. I believe, based on the weekly chart, even a close over $48.50 won't be much help for the bulls as it appears on the daily chart. Instead, I argue we need to see a weekly close over $50 before considering WM.
The risk of buying looks significantly higher than sitting this one out or even looking short on a close under the $47.50 area on a daily and weekly basis.
Editor's Note: This article was originally published at 10:58 a.m. EDT on Real Money on June 23.