3M Company Reports Earnings Under a 'Death Cross'

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 Company  

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 Company

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.