Should You Buy the Weakness in Waste Management?

Over the weekend I read a story about a new radioactive waste site facility in Texas near the New Mexico border. It was a sobering read. I’m as green or greener than the next guy. But to the extent that our 21st century technology still produces 21st century technological trash – in this case, the medical refuge of “syringes, laboratory animals, and other contaminated waste” – you have to appreciate those who’ve made it their business of trying to figure out of better way of getting rid of this stuff.

The company involved in running the Texas facility is a private firm, Waste Control Specialists. But reading this story on Saturday got me thinking about another waste specialist – namely, Waste Management (NYSE: WM) – whose shares have come under increasingly aggressive selling over the past few days.

Technically speaking, the story of Waste Management’s stock is similar to that of many stocks in 2012: rallying from the lows of the fall of 2011 and climbing back into bull market territory, Waste Management shares settled into a trading range for much of the spring of 2012. In the case of WM, this range included a rally to new, six-month highs in late April, as part of what likely appeared at the time to be a breakout and run to even greater heights.

But as so often happens when new, short-term highs are reached, sellers emerged to take profits from the stock’s run thus far.  But here, not only did the selling send WM back into the previous trading range, which alone would cast doubt on the stock’s breakout. Instead, in just two days, traders were able to knock the stock much lower, sending shares of Waste Management to their lowest level since the stock returned to bull market territory in late January.

Down nearly 3% ahead of Monday’s open, WM is now deeply oversold with a positive, short-term edge of nearly one and a quarter percent. The stock has rallied sharply from pullbacks into oversold territory during the past several months in particular (note multi-day retreats in WM in mid-February, early March, and again in the first half of April, and subsequent, short-term, snapback rallies). And while this is no guarantee that traders and investors will behave tomorrow as they did yesterday, the snapback rallies in Waste Management after pullbacks into short-term oversold territory are consistent not just with the statistical history Waste Management, but of stocks in general when trading in longer term uptrending markets.

Are there similar potential short-term opportunities in other waste management oriented stocks? Many of stocks from this group are trading at new, short-term highs after bouncing from oversold conditions of their own from last week. Consider Stericycle (NASDAQ: SRCL), up nearly 2% on Friday after pulling back to oversold levels late last week. Or Clean Harbors Inc. (NYSE: CLH), which continues to climb higher in the wake of a retreat to oversold territory in mid-April.

On the other hand, a stock like Progressive Waste Solutions (NYSE: BIN) may be more worth the attention of short-term traders and active investors. Down more than 4% and finishing technically oversold, shares of BIN staged a strong intraday move higher on the final trading day of the week. Finishing well off sessions lows, Progressive Waste Solutions already may have begun to attract the sort of buying interest that could send the stock higher short-term.

The elephant in the sector, however, remains the double-digit sell-off in shares of Republic Services (NYSE: RSG). Pulling back by more than 13% and dropping into bear market territory, RSG will be a stock that many traders and investors will be avoiding. That said, given the stock’s severely oversold condition in the short-term, avoiding the stock altogether likely is a more prudent approach than looking for further immediate trading to the downside. A short-term bounce in a stock beaten down this hard, this fast, would be among the least surprising outcomes over the next few days.

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David Penn is Editor in Chief of