MMM Stock: Easy Pickings
Picking a great stock to own can be made quite simple. I have learned that the most successful investing strategies that were the easiest to execute were, in fact, the most simple strategies.
The saying “keep it simple, stupid” applies to many things, including investing. So it is fitting that I have picked a company that creates simple, yet effective, products—like 3M Co (NYSE:MMM)—to showcase this outlook. Okay, maybe I have over-stepped my bounds a bit, because 3M actually uses all of the latest technologies to create an array of elite products, and the 3M brand has earned recognition as a top-quality name that is trusted by consumers around the globe.
When I refer to “simple,” I am describing a company’s stock price chart. Great-performing companies share a similar characteristic; the price pattern on its stock chart begins at the lower left and ends at the upper right. If all stocks behaved in such a way, we would all be sitting pretty with the best-performing names.
The key to such a simple strategy is to find names that have such a characteristic, but the slope of the trend has yet to become parabolic. Parabolic trends are unsustainable, and trends end under such conditions.
The following 3M stock chart illustrates the simple trend I am referring to.
Chart courtesy of StockCharts.com
The chart above illustrates the beauty, as well as the simplicity, in the trend of MMM stock.
There are two parallel lines that define this simple trend. The pattern is known as an ascending channel. An ascending channel has two trend lines that define the upper and lower bounds. The share price oscillates between these two lines for as long as time permits. The trend will finally end when the share price exits this channel, and I would use a breach of the lower support line as a reason to exit MMM stock.
The panel on the bottom of the chart is the on-balance volume (OBV) indicator. This indicator uses volume to compute buying and selling pressure. It is produced by cumulatively adding volume on up days and subtracting volume on down days. The data is then taken and plotted on a chart in order to discern the trend. This indicator is used as leading indicator, as well as to confirm the current trend.
OBV has reached a new high in this given cycle, and this indicator confirms that buying pressure is supporting the current move higher and the trend is likely to continue for 3M stock.
The following MMM stock chart adds fuel to the bullish thesis.
Chart courtesy of StockCharts.com
The chart above illustrates the bullish price action that has currently gripped trading in MMM stock. The line highlighted in green is an impulse wave and the flag highlighted in purple is a consolidation wave. Impulse waves usually come in pairs, but the second one follows a consolidation wave that separates the two waves. As long as the consolidation wave remains constructive, an impulse wave of equal length is expected.
Based on the notion of matching impulse waves, the target of such a move—if the consolidation wave were to break above $181.00 on a sustained basis—would be $192.00 as the projected price of MMM stock.
The Bottom Line on 3M Stock
3M stock has a beautiful trend that begins in the lower left and moves progressively to the upper right. This simple trend sees no signs of fatiguing as the current charts, provided above, point to further strength after the consolidation wave is complete. My bias on MMM stock is bullish, and I will continue to be bullish until the charts give me reason to be otherwise.