3M

3M (MMM - Get Report) set its multi-year low of $150.81 on Oct. 3, which is below its monthly pivot for October at $155.92. The stock is cheap with a P/E ratio of 16.72 and a generous dividend yield of 3.70%, according to Macrotrends. Given this dividend and despite today's weak stock market open on China trade concerns, my call is to buy the stock between its Oct. 3 low of $150.81 and its monthly pivot at $155.81.

The stock closed Monday at $153.52, down 19.6% year to date and in bear market territory 40.9% below its all-time intraday high of $259.77 set on Jan. 26, 2018. The stock had a bull market run going into 2018 as the economy was booming. The diversified manufacturing and technology conglomerate faded as the U.S. economy began to feel the global economic slowdown and the risk of increasing tariffs caused by the trade war with China.

3M is a component of the Dow Jones Industrial Average and its dividend yield of 3.70% will qualify the stock as one of the "Dogs of the Dow" in 2020.

The company is not just the maker of the ever-popular "post-it notes."

3M should be considered a multi-national technology conglomerate. Its industrial business operates in the automobile aftermarket, appliances, paper and printing, food and beverages and construction. Its safety and graphics activities provide security and productivity facilities and systems. Its healthcare activities support medical clinics, hospitals, health information systems and food-related manufacturing and testing. Its consumer segment provides business to business applications, home improvement and pharmacy retailing. Some say this is too much diversity, I say that diversity provides stability as segments shift to support a solid bottom line. 

The Daily Chart for 3M Co.

Courtesy of Refinitiv XENITH

The daily chart for 3M clearly shows a volatile bear market downtrend to 40.9% from its all-time intraday high of $258.77 set on Jan. 26, 2018 to Monday's close of $153.52. Note that Dec. 26 was a positive daily "key reversal" as the stock traded to its 2018 low that day, then closed the day at $186.26 above the Dec. 24 high of $183.54. This set the stage for an early-2019 rally.

The stock ended 2018 at $190.95, which was an important input to my proprietary analytics. The annual risky level remains at $230.32. The 2019 rally ended with the high of $219.75 set on April 24. The price gap lower on April 25 was caused by an earnings miss reported before that day's open. The June 28 close of $173.34 was another important input to my analytics, which resulted in a semiannual risky level at $219.44 for the second half of 2019.

The close of $164.40 on Sept. 30 was also an input to my analytics and resulted in a fourth-quarter risky level at $181.83 and a monthly pivot for October at $155.92, which has been a magnet so far this month.

The Weekly Chart for 3M Co.

Courtesy of Refinitiv XENITH

The weekly chart for 3M is negative with the stock below its five-week modified moving average of $161.98 and well below its 200-week simple moving average or "reversion to the mean" at $191.91, which failed to hold during the week of May 3. The 12x3x3 weekly slow stochastic reading is projected to slip to 26.76 this week down from 31.46 on Oct. 4.

Trading Strategy: Buy 3M with the stock between its Oct. 3 low of $150.81 and its monthly pivot at $155.92. Reduce holdings on strength to quarterly, semiannual and annual risky levels at $181.83, $219.44 and $230.32, respectively.

How to use my value levels and risky levels:

Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.

The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.

The quarterly level changes after the end of each quarter so the close on Sept. 30 established the level for the fourth quarter. The close on Sept. 30 also established the monthly level for October as monthly levels change at the end of each month.

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.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.