Bear Chart of the Day -- 3M Needs a Bounce

NEW YORK (Real Money) -- Some of these very big names continue to struggle on an individual basis. Yet another Dow 30 component hit the bear radar today, with 3M  (MMM) possibly leading a charge lower. 


If there is any bearish name looking for a bounce this week, it is 3M. Heck, I'd cut that in half and say today or tomorrow. Price is right along not one, but two support lines here. A push back to $159.50 would not be a surprise, but then again it doesn't take the stock out of the current bearish channel. We can't confuse a bounce within a pattern as a reversal. Furthermore, this would not even come as an oversold bounce as neither the slow stochastics nor the RSI are oversold. Both are simply alarming, with the RSI being the more bearish of the two.

This matters.

We already have momentum bearish, while the trend looks ready to accelerate should we see a bearish crossing on the slow stochastics indicator. The bullish crosses on the slow stochastics have been good for a bounce, but each has been capped by the declining resistance line. With our support line more or less horizontal, this has created smaller bounces. 3M needs a close over $160 to negate the bearish setup. But a close under $155 could accelerate us down. One is $4 away, while the other is less than a buck and indicators favor the bears on top of the price skew

All in all, don't expect 3M to outperform the market here. A bounce will likely only be buoyed by a rising tide.

The weekly chart offers a solid downside target expectation should $155 fail. It also demonstrates visually how much $155 matters. Should we see a weekly close under $155, then I would put $145 square in my sights as the downside target. A healthy $10 drop, but also not disastrous. The $10 downside is also roughly the same measure from the recent high to the current support. Furthermore, we can see the strength is leaving 3M. RSI has already pushed under 50 ahead of the stock. This is a very big yellow flag. The slow stochastics has only seen this level twice before in the last two years and both times came with the very similar $10+ dollar drop I am expecting here under $155.

The indicators here are trying to lead. At the very least, they raise some big yellow flags and support the thesis on the daily chart that only a close over $160 can negate this and 3M needs the overall market to rally to have any reasonable chance of shaking off the bearish technical position in which it currently finds itself.

Editor's Note: This article was originally published at 9:18 a.m. EDT on Real Money on June 16.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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