3M Corporation (MMM)

This update will focus on any long-term trends or chart patterns for 3M Corporation (MMM). MMM was one of a few different requests last week. The 3M Corporation makes a range of products, ranging from adhesives & post-it notes to automotive and industrial cleaners.

Without realizing it until I was researching and writing this article, I use a ton of 3M products. I use their cleaning products on my bass boat, tapes, post-its, scotch write scrub pads, and the list goes on.

To browse all of 3M’s products, click on the images below and the link will take you to the 3M’s official website.

3M’s tag line is “We Apply Science to Life“. Maybe I should change the Trendy Stock Charts tagline to something similar….”I Apply Technical Analysis to Charts“. Or then again, maybe I shouldn’t change anything. The new tagline just doesn’t carry the same emphasis as “It’s All About the Trend“.

Speaking of trends, let’s jump to the charts and see if the current trend(s) can be identified for 3M’s share price. Off we go!

3M Corporation (MMM) – Bullish Impulse Wave Pattern

This first chart for 3M Corporation is a 20 year monthly candlestick chart. I’ve outlined a Bullish Impulse wave pattern that developed over a 9 year period. This wave pattern appears to have completed development in January 2018. MMM’s share price is currently in a correction period. Some sort of corrective wave pattern needs to develop to complete the 8 wave process in the Elliott wave cycle. Wave A of a corrective type pattern appears to have completed and Wave B, a counter-trend wave, is currently in process of developing. The Doji candlestick that developed in September most likely represents the midpoint of the rebound.

There is one extremely important item I’ve learned over the years when applying Elliott wave theory. This important item was recently reinforced on a shorter-term basis for AMD. What is that important item?

Wave 5 in the above illustration for 3M contains the extended wave in this particular Bullish Impulse wave pattern. So what exactly is an extended wave pattern and what are the implications? Keep reading to find out!

MMM – Wave 5 Extended Wave Pattern

Statistically speaking, the most typical place for an extended wave pattern to develop in an Impulse wave pattern is in either Wave 3 or Wave 5. In the case for MMM’s share price on the 20 year chart above, the extended wave pattern developed in Wave 5. The extended wave pattern is identified by the black trendlines in the blue Wave 5.

First off, let’s review what an extended wave pattern is. Quite simply, an extended wave pattern is an identifiable Impulse wave pattern within a single wave of a larger Impulse wave pattern.

Being able to identify extended wave patterns can help the trading process immensely. An extended wave pattern that develops in Wave 3 or 5 provides a very specific price range and trading strategy to purchase or repurchase any previously sold shares. Depending upon which wave it develops in helps to determine the depth of the subsequent correction.

And while every Impulse wave pattern subdivides down into a smaller Impulse wave patterns, the key is to identify the “most clearly identifiable” Waves 1-5. That is Wave 5 for 3M’s share price. When an extended wave pattern develops in Wave 5 of a Bullish Impulse wave pattern, the main support area for the ensuing correction is[s2If !current_user_can(access_s2member_level1)]…….

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I review the probable price action for 3M Corporation’s share price, both short-term and long-term.

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)] Wave 1 of the extended wave pattern. I identified Wave 1 of the extended wave pattern with the gray shaded box on the above chart. The $162 price level within the gray shaded box appears to be the most probable ending area for Wave C.

However with MMM’s share price still in the process of developing Wave B, it may take a little more time before Wave C even begins. It is rough holding shares when a Wave C is in process. Rapid drops with few rebounds are experienced. You can read further about Wave B and Wave C Characteristics here.

MMM – Analyzing Waves A & B

This chart is a 1 year daily candlestick chart for MMM to analyze Waves A & B identified above in more detail. Wave A appears to have developed into a Bearish Impulse Wave Pattern. Wave 3 of the Bearish Impulse wave pattern is the Extended Wave in the pattern. Every downtrend needs to “correct” just like every uptrend.

Different corrective wave patterns allow for different rebound heights for Wave B. Only a couple of the corrective patterns allow for a new high during Wave B (the Expanded Flat wave pattern and some of the Triangle wave patterns).

Since MMM’s share price did “close the window” on the resistance area from the Falling Window candlestick pattern, look for Wave B to continue higher short-term. With market conditions currently on the bullish side, a Wave B “correction” should try to find its way back to at least the 61.8% Retracement Line. if not try to push back to all-time highs. Remember that this is a monthly candlestick chart we are talking about here. Wave B still could have several months of continued development to make it to those levels. It most likely will not be a quick trade back to those levels.

MMM – Point & Figure

Let’s see if the Point & Figure charts for MMM agree with either of my assessments from above – limited upside short-term and a continued consolidation/correction longer-term.

High/Low P&F Chart – $245 Bullish Price Objective

Closing P&F Chart – $261 Bullish Price Objective

Well, both of the P&F Charts seem to agree with the shorter-term price objective of mostly limited upside from its current share price. The high/low chart shows MMM’s share price stopping before its previous high. The closing chart indicates 1 more new all-time high.

Technically, either could happen. Statistically though, MMM’s share price will most likely stop short of its previous all-time high before resuming back into its longer-term downtrend. Remember, Wave B is typically an opportunity to start to trim shares and move out of the position before the Wave C ensues in full force. The Wave C target area I identified above indicates a lower low than Wave A.

3M Corporation (MMM) – Summary

In summary, the short-term price objectives for 3M Corporation (MMM) appear somewhat limited. The risk to reward ratio is about 1:1 on the upside potential compared to the downside risk. Typically a 1:3 ratio is favored. 3M Corporation (MMM) currently pays about a 2.6% dividend, which could help with returns if the trade is entered.

Since the Bullish Impulse wave pattern took approximately 9 years to complete, I do not see the corrective wave pattern ending anytime soon. Rather, Wave B will take some time to grind up back towards its previous high before Wave C of a corrective pattern begins. MMM’s share price could be looking at another year to complete Wave B and develop Wave C.

Long-term, an entry in the Wave C target area could provide for the best entry area on a long-term basis. Consider setting an alert on your trading platform for a break below the $200 price level. MMM’s share price could be monitored at that point towards the Wave C target area. In order to execute this trade, investors must show incredible patience during any continued Wave B advance.  Wave C is the wave to monitor, especially as MMM’s share price approaches (and most likely drops below) the $200 price level.

If the trade is entered into short-term, pull the trigger fast on any drops once a 61.8% retracement has been completed, or around the $233 price level.

On deck: Idea Chamber analysis for CTAS & SIRI.

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