3M Co. (NYSE: MMM)

3M Company is a diversified technology company with presence in the industrial and transportation; health care; consumer and office; safety, security and protection services; display and graphics, and electro and communications businesses. 3M operates in six business segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics, and Electro and Communications. 3M products are sold through distribution channels, including directly to users and through wholesalers, retailers, jobbers, distributors and dealers in a number of countries worldwide.

To review 3M’s stock, please take a look at the 1-year chart of MMM (3M Company) below with my added notations:

From the start of the year until May, MMM had been consolidating within a sideways, Rectangle pattern. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For MMM, the Rectangle pattern formed a $90 resistance (blue) and an $85 support area (navy), which was also a brief resistance in January.  As you can see, half way thru May MMM broke below the support and has been struggling to get back above $85 and stay there.

The Tale of the Tape: MMM has broken down from an $85 to $90 Rectangle pattern, but has pushed slightly back above $85.  A long trade could be entered on a pullback to $85 or on a breakout above $90. A short trade could be made on a rally up to $90 or on a break back below $85.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT