"Challenge dictates risk."

-- Christina Nikolov

Date: January 8, 2003

Opinion: Bearish

Current Price: $10.70

Target Price: $8.39, then possibly $6.24

Commentary:

Allied Waste (AW) soared 39% between October 10th and December 2nd, 2002, then transitioned into a trading range that resembles a double top. The peak of this potential pattern is $11.22, while the low is $9.78. (chart #1)

Using the stochastic oscillator, AW is extremely overbought on the daily and monthly charts. The last time the stochastic oscillator was this overextended on a monthly basis was March 2001. Within six months the shares surrendered 43% of its market value. (chart #2)

Support can be found at the base of the double bottom ($9.78), as well as near $8.90 and $8.50. There are three upside gaps created in October 2002 that might provide support as well. Those levels at $7.80, $6.57 and $6.24. (chart #1)

To profit from this anticipated decline, we suggest the March 12.50 put (Symbol: AWOV), which is currently offered at 2.20.  If you are looking for a cheaper, but more risky option to trade, consider the June 10 put (Symbol: AWRB), which is currently offered at $1.20.



Chart(s):

#1) Allied Waste (AW)  - Six Month Daily Chart

Click the Chart for an Enlarged View

#2) Allied Waste (AW)  - Sixty Month Chart

Click the Chart for an Enlarged View