Waste Management (WMI) PriceWatch Alert Technicals Showing Bearish

Posted: Monday, July 13, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Waste Management (NYSE: WMI) ended the last trading session at $26.87. So far the stock has hit a 52-week low of $22.10 and 52-week high of $36.96. Waste Management stock has been showing support around 26.18 and resistance in the 27.28 range. Technical indicators for the stock are Bearish and S&P gives WMI a positive 4 STAR (out of 5) buy rating. WMI appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Oct '09 27.50 covered call (WMI JY) for a net debit in the $25.72 area. That is also the break even stock price for this trade. This covered call has a 96 day duration, provides 4.28% downside protection and a 6.92% assigned return rate for a 26.31% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the WMI Jan '11 20 Call (VUW AD) and selling the Oct '09 27.50 call (WMI JY) for a $6.45 debit. The trade has a 96 day life and would provide 1.56% downside protection and a 16.28% assigned return rate for a 62.00% annualized return rate (for comparison purposes only). Waste Management has a current annual dividend yield of 4.36%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]