3M Company (MMM) is a multi-national technology conglomerate that manufactures industrial, safety and consumer products including the ever-popular Post-it Notes. The stock is a component of the Dow Jones Industrial Average and has been a significant laggard year to date.
3M stock closed Friday, Oct. 19, at $199.85, down 15.1% year to date and in bear market territory at 23.1% below its 2018 high of $259.77 set on Jan. 26. The stock is 4.9% above its 2018 low of $190.57 set on July 24. The Dow 30 is up 2.9% year to date and is 5.6% below its Oct. 3 all-time high of 26,951.81 set on Oct. 3. The Dow is 9% above its April 2 year-to-date low of 23,344.52.
Analysts expect 3M to report earnings per share of $2.70 when the company discloses its third quarter results before the opening bell on Oct. 23. A positive reaction to earnings led to the all-time intraday high of $259.77 on Jan. 26. A negative reaction to earnings on April 24 led to the May 1 low of $191.44. This was repeated on July 24, with the 2018 low of $190.57 set that day following earnings. 3M is expected to benefit from solid product offerings, but research and development costs remain a drag. The company also faces increased costs of retirement benefits, raw materials inflation and interest expenses.
The daily chart for 3M CompanyCourtesy of MetaStock Xenith
The daily chart for 3M shows that a "death cross" was confirmed on April 30 when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices lay ahead. This negative was in play when the stock set its 2018 low of $190.57 on July 24. The stock tested its 200-day simple moving average of $216.34 on Oct. 3. The three horizontal lines from top to bottom are my quarterly risky level at $237.33, my semiannual risky level of $225.64 and my annual pivot of $220.75, last tested on April 18.
The weekly chart for 3M CompanyCourtesy of MetaStock Xenith
The weekly chart for 3M is negative, with the stock below its five-week modified moving average of $206.10. The stock is above its 200-week simple moving average at $184.70, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading fell to 63.80 last week, down from 74.23 on Oct. 12.
Given these charts and analysis, traders should buy 3M shares on weakness to the 200-week simple moving average of $184.70 and reduce holdings on strength to my annual, semiannual and quarterly risky levels of $220.75, $225.64 and $237.33, respectively.