3M Company operates as a diversified technology company worldwide. The company serves automotive, electronics and energy, appliance, paper and printing, packaging, food and beverage, construction, clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, health information systems, food manufacturing and testing, consumer and office retail, home improvement, drug and pharmacy retail, and other markets. The company sells its products through wholesalers, retailers, jobbers, distributors, and dealers, as well as directly to users.
Take a look at the 1-year chart of 3M (NYSE: MMM) below with the added notations:
After MMM finished its rally to the $180 area in July, the stock started to trade sideways. During that time, the stock had also created a key level of support at $175, which it eventually broke. MMM fell lower from there, as one would expect, but now the stock is approaching the key level of $175 again. Traders should expect resistance to come in at that level.
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The Tale of the Tape: MMM has a key level at $175. Traders that are bearish on the stock could enter a short position near $175 with a stop placed above it. Bullish traders would want to get long on a break above $175.
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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach