MMM Stock: All-Time Highs
I have held a bullish view on 3M Co (NYSE:MMM) stock for quite some time. This view has been predicated on the method I use to base my investment views. This method relies heavily on technical indicators and price patterns, which are used to decipher trends and forecast future prices. These indicators continue to mount, suggesting that higher 3M stock prices are a likely endeavor.
The method I mentioned is no mystery, as I have been a proponent of technical analysis for nearly two decades, and my previous successes in this style of analysis support the notion that technical analysis is an incredibly useful tool for investing and setting up trading strategies.
In my previous publication on 3M, I outlined my case that the price was setting up to make a move. This setup is now complete, and higher prices can now be expected.
The following MMM stock chart illustrates the long-term trend and a number of factors that continue to support holding a bullish view.
Chart courtesy of StockCharts.com
The price chart above illustrates a pattern that has supported the advance in 3M since 2011. The supporting pattern is known as an ascending channel. An ascending channel has two parallel upward-sloping trend lines that define upper resistance and lower support. These trend lines serve to contain the price as the stock oscillates between support and resistance. As long as 3M continues to trade within these trend lines, the bullish trend toward higher prices remains intact.
The moving average convergence/divergence (MACD) indicator in the lower panel of the above chart generated a bullish cross in May 2016, and this signal remains in bullish alignment, which supports the notion of higher MMM stock prices. MACD is an effective momentum indicator that uses signal-line crossings to distinguish between bearish and bullish momentum.
When a bullish cross is engaged, it suggests that bullish momentum has once again overwhelmed any bearish momentum and, as a result, the path of least resistance is toward higher prices.
It is not uncommon for a price to return to a previous level of resistance from above. This price action is highlighted on the chart above as a backtest, and it serves to reaffirm the view that the break above resistance was legitimate, and that higher prices are likely to follow.
The following price chart takes a closer look at the backtest and focuses on the bullish price action that is contained within it.
Chart courtesy of StockCharts.com
The break above resistance and the subsequent backtest contained bullish price action that continues to suggest a higher 3M stock price. Bullish price action consists of impulse waves that advance a price, and consolidation waves that serve to alleviate overbought conditions and set up the next impulse wave.
The impulse wave is highlighted in green and the consolidation wave is highlighted in purple, on the MMM price chart above. This alternating wave structure is instrumental in the sustenance of a long-term trend. The signals that were generated within this bullish wave structure reinforce the view that higher stock prices are likely to follow.
The bullish signal that was generated within the impulse wave in March 2016 is a golden cross. This bullish signal is produced when the faster 50-day moving average, highlighted in blue in the above chart, crosses above the slower 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is now in play.
This signal was in danger of averting as the moving averages that generated the golden cross began to converge in December 2016. In bull markets, it is common for a price to accelerate as these moving averages converge in order to avert a bearish signal. This type of price action serves to reinforce the notion that the bull market is still intact and the trend towards higher prices continues.
Shortly after the bearish signal was averted, the price exited the consolidation wave via a breakout, indicating that a new impulse wave is now under development, and higher prices are likely.
The benefit of this wave structure is that it not only deciphers the next direction in the price, but it can be also be used to generate a price objective. The theory surrounding these waves is that the consolidation waves act as a midpoint, and the next impulse wave tends to mirror the initial impulse wave. Applying this theory to the wave structure above creates an initial price objective of $220.00.
This price objective is only an initial upside objective, as resistance outlined by the ascending channel is still the main price objective.
Bottom Line on 3M Stock
My bullish view on MMM stock remains intact, and the recent developments on the price charts suggest that higher prices are likely. My views are predicated on the signal and price action that are generated on the 3M stock chart and, as long as these indicators continue to support the notion of higher prices, my views on this investment will match.