3M (MMM) announced Tuesday it was combining its food safety business with Neogen (NEOG) . Will this have an impact on the technical condition of MMM? Let's check.
We have not reviewed the charts of MMM since July 16 when we recommended that "If you are long MMM I suggest raising stops to $194 in case MMM declines with weakness in the broader market."
Let's check on the charts to see what strategy makes sense today.
In the updated daily bar chart of MMM, below, we can see that the shares did weaken from our mid-July review and hit our $194 sell stop in late August. MMM continued to decline to an early December low. Prices are trading below the declining 50-day moving average line and below the flat 200-day line.
The On-Balance-Volume (OBV) line declined from June but has been mostly flat since early October. The 12-day price momentum study made a low in September and a higher low in December even as prices made a lower low. This difference between the indicator and the price movement is a bullish divergence and can foreshadow a bounce or rally ahead.
In this weekly Japanese candlestick chart of MMM, below, we see some technical light at the end of the tunnel. Prices are trading below the cresting 40-week moving average line. Notice the lower shadow on the last candle in November? Traders are starting to reject the lows.
The weekly OBV line has been steady the past few months. The 12-week price momentum study in the lower panel shows improving momentum readings.
In this daily Point and Figure chart of MMM, below, we can see that prices have reached a downside price target. This is not the same as an upside price target but it is an improvement. Also, we can see a fair amount of support below the market.
Bottom-line strategy: MMM has reached a Point and Figure price target and there is a bullish divergence between the price action and the momentum study. I like this "set up" and would suggest to aggressive traders to go long MMM at current levels. Risk a close $169 or a new low close for the move down. Add to longs above $186.
