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ChartWatch: This Waste Stock Ain

Andy Crowder

Every investor would surely like to turn his or her trash into cash in this low interest rate environment. But is that possible?

As unbelievable as it seems, an investment in Waste Management (NYSE: WM) is one way to turn trash into cash … cash dividends, that is.

Waste Management offers other benefits to shareholders, too.

Because waste removal is a critical component to any society, stocks in this sector are less volatile. However, Morgan Stanley (NYSE: MS) analysts seem to have forgotten that fact and downgraded the shares last week.

The announcement immediately sent WM shares 5% lower to $31. While the sell-off was furious, it didn’t take long for investors to find value in a stock trading at 14 times EPS and yielding 4.6%.

Though the stock declined 5% within hours, it recovered that and more, only one week later.

Investors supported Waste Management at a time when Morgan Stanley analysts didn’t. I think they were right. Also, positive investor sentiment could send WM even higher.

http://stockcharts.com/c-sc/sc?s=WM&p=D&yr=1&mn=2&dy=0&i=p06326868484&a=272229978&r=1342804866580This chart shows the price of WM shares along with an important support area for you to monitor.

Buyers supported the $32 level (blue line) when expert analysts didn’t. This price should act as a strong support region from now on. Investors should use it as a stop loss level too.

In addition to the support at $32, the shares also regained the 50-day moving average (blue arrow). Institutions typically buy stock near the 50-day moving average.  This buying often leads to huge rallies.

Because of this recent support from buyers, Waste Management stock is poised for strong capital gains. The shares also pay 4.4% as cash dividends, blowing away the yield on Treasuries.

Watch WM’s 50-day moving average closely over the next two weeks. So long as the shares find support above it, look for a summer rally and collect cash dividends along the way.

Equities mentioned in this article: MS, WM