The well-known American multinational conglomerate corporation operating in the fields of industry, worker safety, health care, and consumer goods, 3M Co (NYSE: MMM) seem to be gearing up for a surge as per its latest charts.
#1 Ascending triangle pattern breakout: MMM’s daily chart shows that the stock has currently broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. A breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level.
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish bias.
#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 IH&S Pattern: From the daily chart, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart in orange color.
An IH&S pattern is a bullish pattern. A breakout from an IH&S pattern is usually the sign of an upcoming bullish move. Currently, the stock has broken out of the IH&S pattern, indicating possible bullishness.
#6 Downtrend Broken: The weekly chart shows that the stock has broken out of the prevailing short-term downtrend. This downtrend line is marked in pink color in the weekly chart below. A break out from downtrend is usually a bullish sign.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
#8 MACD above Signal Line: In the weekly chart as well, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.
#9 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of MMM at the current price of $215.03 and the rest if the stock closes above $220.
TP: Our target prices are $230 and $240 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss at $209 (for entry near $215.03) and $217.80 (for entry near $220). Note that this stop loss is on a closing basis.
Our target potential upside is nearly 5% to 12% in the next 4-6 months.
- Entry near $215.03: For a risk of $6.03, the target rewards are $14.97 and $24.97. This is a nearly 1:3 and 1:4 risk-reward trade.
- Entry near $220: For a risk of $2.20, the target rewards are $10 and $20. This is a nearly 1:5 and 1:9 risk-reward trade.
In other words, this trade offers nearly 3x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
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