3M Company Reports Oversold, Below Key Levels

3M Company (MMM) is a multi-national technology-based conglomerate providing innovations in raw materials, water, energy, health, safety and education. The company famous for Post-it Notes is involved in many industries, including automotive, manufacturing, mining, and oil & gas. 3M is set to report first quarter earnings before the opening bell on Tuesday, April 24.

3M shares closed Thursday at $218.85, down 7% year to date and in correction territory at 15.8% below its 2018 high of $259.77 set on Jan. 26. The stock set its 2018 low of $209.47 on April 2. 3M is a component of the Dow Jones Industrial Average and is underperforming the average. The Dow 30 is down 0.2% year to date and is 7.3% below its all-time high set on Jan. 26.

Analysts expect 3M to post earnings per share of $2.51 when it reports results on Tuesday. This conglomerate beat earnings estimates in each quarter in 2017. 3M is amid divestitures and acquisitions that are expected to reduce expenses. The company should also benefit from a weak dollar and reduced taxes from the "Tax Cut and Jobs Act." (See also: 4 Stocks That Will Profit From Dollar's Pullback.) 

The daily chart for 3M Company

Courtesy of MetaStock Xenith

3M has been below its 50-day and 200-day simple moving averages since March 22, with these averages converging at $227.42 and $224.15, respectively. If the 50-day falls below the 200-day, a "death cross" will be confirmed, which indicates that lower prices lie ahead. My annual pivot of $220.75 is the lower of four horizontal lines. This key level has been a magnet since Feb. 9, and recent strength returned the stock to $220.75 after it set its 2018 low of $209.47 on April 2. My semiannual, quarterly and monthly risky levels are the horizontal lines of $225.33, $236.43 and $253.93, respectively.

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The weekly chart for 3M Company

The weekly chart for 3M is negative but oversold, with the stock below its five-week modified moving average of $223.44. The stock is well above its 200-week simple moving average at $177.44, which is "reversion to the mean," last tested at $76.2 during the week of Oct. 14, 2011. The 12x3x3 weekly slow stochastic reading is projected to end this week at 17.13, below the oversold threshold of 20.00.

Given these charts and analysis, my trading strategy is to buy weakness to the April 2 low of $209.47 and reduce holdings on strength to my semiannual risky level of $225.33. (For more, see: How 3M Makes Its Money.)