Trade of the Day: Short MMM Stock Into Year End

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3M Co (MMM) — This diversified global conglomerate provides enhanced product functionality through its coatings, sealants, adhesives and other chemical additives to a wide array of industries including electronics, health care and telecommunications. With more than half of the company’s sales generated overseas, it is especially susceptible to currency risks.

Analysts at S&P Capital IQ Equity Research rate MMM stock a “hold” and express disappointment with the company’s lack of operating leverage. They also note that while increased spending on R&D and enterprise resource planning (ERP) system implementation should benefit the company in the longer term, it will likely lead to subpar EPS growth in the short term compared with 3M’s peers.

Following the company’s Q3 earnings report, Capital IQ lowered its full-year earnings estimate to $7.79 per share from $7.94.

Technically, MMM stock recovered from a double-bottom at $135 made in September. However, the recovery stalled at a band of resistance at $156, the 200-day moving average, to $160. When shares reached this resistance band, volume dropped and MACD rendered a sell signal.

Sell MMM stock short at $158 with a trading target of $145 for a potential return of 8% by year end. A stop-loss order should be entered at $162 to prevent against losses in the event of a breakout.

Since the stock goes ex-dividend today, short sellers will not be required to cover the $1.03 per share quarterly dividend. However, as with all short sales, check with your broker for any special restrictions and the ability to borrow shares.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/3m-co-mmm-trade-of-the-day/.

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