3M Company (MMM - Get Report) reports earnings before the open on Thurs., July 25, recovering from a huge bear market decline. My call is to buy the stock down to its 50-day simple moving average at $169.78 and lock in a solid dividend yield.
3M is an industrial conglomerate that has lagged all year until trading as low as $158.12 on June 3 on pressure from the China trade war. The stock is also a component of the Dow Jones Industrial Average. An interesting statistic is that 13 stocks in the Dow are consolidating bear market declines and 3M is one of them. 3M's bear market was a decline of 38% from its all-time intraday high of $259.77 set during the week of Jan. 26, 2018 to its June 3 low of $159.32.
At Tuesday's close of $177.52, the recovery has shares of 3M down 6.8% year to date and up 11.6% from their June 3 low. The stock is in correction territory, 19.2% below its 2019 high of $219.75 set on April 26.
Analysts expect 3M to earn $2.04 per share when it reports before the opening bell Thurs., July 25. The stock has a P/E ratio of 17.99 and a dividend yield of 3.30%, according to Macrotrends. This would make it a candidate to be a member of the "Dogs of the Dow" for 2020.
Some on Wall Street say the company should focus more on its Healthcare business, which is highlighted by its acquisition of Acelity and its focus on wound care. Some say the conglomerate has too many lines of business, which has the company experiencing numerous competitive pressures. 3M is a multi-national technology conglomerate that manufactures industrial, safety and consumer products including the ever-popular "post-it notes."
The Daily Chart for 3M
Courtesy of Refinitiv XENITH
The daily chart for 3M shows a huge price gap lower on April 24 after it reported an earnings miss and disappointing guidance. This weakness continued to the 2019 low of $159.32 on June 3. The close of $173.34 on June 28 was an important to my proprietary analytics. The annual risky level left over from the beginning of the year is at $230.31. The stock is below its monthly risky level for July at $189.71, its quarterly risky level at $195.64 and its semiannual risky level at $219.44.
The Weekly Chart for 3M
Courtesy of Refinitiv XENITH
The weekly chart for 3M is positive with the stock above its five-week modified moving average of $174.74 and below its 200-week simple moving average or "reversion to the mean" at $191.48, which is an upside target. The 12x3x3 weekly slow stochastic reading is projected to rise to 30.64 this week up from 22.12 on July 19.
Trading Strategy: Buy weakness to the 50-day SMA at $169.78 and reduce holdings on strength to its monthly, quarterly and semiannual risky levels at $189.71, $195.64 and $219.44, respectively.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, the latest on June 28. The quarterly level was changed at the end of June. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.