For investors using technical analysis to find possible opportunities, the search usually focuses on two main questions: which stock to buy and when to buy it. A methodical way to answer these questions is to look for stocks that are both technically sound and building a constructive price pattern. The Technical Breakout Setups screen does this, filtering for securities with a high ChartMill Technical Rating, which shows good underlying trend condition, and a high ChartMill Setup Quality Rating, which points to a consolidation phase that might come before a new price move. This pairing tries to find stocks that are not only in clear uptrends but are also tightening in a way that presents a specific, lower-risk entry point for a possible breakout.
A recent scan using this method has identified Waste Management Inc (NYSE:WM) as a candidate for more detailed review. The company, a top provider of waste management and environmental services in North America, is now showing traits that match the breakout strategy's main ideas.
Reviewing the Technical Condition
The base of the breakout strategy is a stock's underlying technical condition, measured by the ChartMill Technical Rating. A high rating implies the stock is in a lasting uptrend, which is important because starting a trade in the direction of the main trend usually increases the chance of a good outcome. Based on the detailed technical report, WM receives a good Technical Rating of 8 out of 10.
This score is backed by several important points from the report:
- Trend Direction: Both the long-term and short-term trends for WM are labeled positive. This agreement across time periods is a good sign, showing steady buying interest.
- Moving Average Position: The stock is priced above all its main simple moving averages (20, 50, 100, and 200-day), and each of these averages is itself in a rising pattern. This arrangement shows a well-ordered uptrend.
- Price Level: WM is trading in the higher part of its 52-week range. While it has performed a little less than the wider S&P 500 index lately, its performance over three months is still good, with increases of about 8.6%.
This technical picture confirms that WM is not in a downtrend or a flat period but is instead positioned within a sound, continuing upward path, the first important requirement for a breakout setup.
Reviewing the Setup Quality
A sound trend by itself is not enough reason to start a trade; buying a stock that has already risen a lot can be risky. This is why the Setup Quality Rating is key. It finds times of price consolidation or "tightening" inside the larger trend, where price movement often lessens and the stock forms a base before its next possible rise. A high Setup Rating implies a clear level of support has been formed, giving a sensible area to set a protective stop-loss order.
WM currently has a very good Setup Rating of 9. The technical report states that prices have been consolidating recently, moving in a band between about $218 and $239 over the last month. This time of balance after a previous rise is exactly the kind of pattern the screen looks for.
Important parts of the setup are:
- Clear Resistance and Support: The report notes a defined resistance area just above the current price, starting at $235.51. A clear move above this level could indicate the beginning of the next upward phase. On the other side, a firm support area exists between $221.98 and $230.25, created by a combination of trendlines and moving averages.
- Recent Buying Signal: A "Pocket Pivot" signal was seen very recently. This is a volume-based indicator that implies buying by larger investors during the consolidation phase, giving extra confirmation to the setup.
- Automated Trade Idea: Following this structure, the report presents a sample trading plan. It proposes a possible entry on a breakout above the $235.51 resistance, with a stop-loss set below the support area near $221.22. This establishes a specific, measurable risk situation, which is a key part of disciplined technical trading.
A Candidate for Watchlists
The combination of a sound technical trend (Rating of 8) and a good, tightening price pattern (Setup Rating of 9) puts Waste Management (WM) on the watchlist for investors using a breakout method. The stock shows the required elements: a clear uptrend backed by important moving averages, and a recent consolidation that has created clear levels of support and resistance. A move above the noted $235.51 resistance level on strong volume could be seen by chart analysts as a signal for the next possible stage of the uptrend.
Interested in finding more possible breakout setups? You can use the same screen that found WM with the Technical Breakout Setups tool to see a new list of candidates each day.
Disclaimer: This article is for information only and is not investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis uses technical indicators and automated reports, which are not guaranteed to be accurate or complete. All investing and trading has risk, including the possible loss of principal. You should do your own research and talk with a qualified financial advisor before making any investment decisions.
