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 an extreme laggard year to date. 3M closed Friday at $201.95, down 14.2% year to date and in bear market territory at 22.3% below its 2018 high of $259.77 set on Jan. 26. The stock is in recovery mode at 5.5% above its 2018 low of $191.44 set on May 1.
Analysts expect 3M to post earnings per share of $2.59 when the company reports second quarter earnings before the opening bell on July 24. Back on Jan. 26, there was a positive reaction to earnings, but that day's high of $259.77 proved to be the all-time high. Then, on April 24, a negative reaction to first quarter earnings led to the 2018 low of $191.44 set on May 1. For the second quarter, the focus is on the impact of tariffs as commodity prices have been under upward pressure. Note that the cost of sales in 2017 rose by 6.4% in 2017 and escalated by 9.1% in the first quarter of 2018. Rising costs are thus the major focus for second quarter results. (See also: 2 Dow Stocks for a Volatile Market.)
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 lie ahead. The stock was already below the middle horizontal line at $220.75, which is my annual pivot. The stock is currently between the 50-day and 200-day simple moving averages at $200.34 and $221.92, respectively. The stock is below all major levels from my proprietary analytics – my monthly, annual, semiannual and quarterly risky levels are $207.39, $220.75, $225.64 and $227.67, respectively.
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The weekly chart for 3M CompanyCourtesy of MetaStock Xenith
The weekly chart for 3M is positive, with the stock above its five-week modified moving average of $201.55. The stock is well above its 200-week simple moving average at $181.11, which is the "reversion to the mean," last tested at $76.20 during the week of Oct. 14, 2011. The 12 x 3 x 3 weekly slow stochastic reading rose to 29.44 last week, up from 23.48 on July 13.
Given these charts and analysis, my strategy is to buy 3M shares on weakness to the 200-week simple moving average of $181.11 and to reduce holdings on strength to my monthly and annual risky levels of $207.39 and $220.75, respectively. (For more, see: How 3M Makes Its Money.)