It might not be an official Dog of the Dow, but 3M (NYSE:MMM) looks ready to learn a new trick on the price chart — and pay out big-time dividends of another sort for investors buying MMM stock today. Let me explain.
3M stock failed to make the Dow Industrials’ Dogs of 2019 list. But income investors have little reason to cry. Outside of the widely followed dividend investing strategy, MMM stock is a dividend aristocrat.
The company’s 60-year history of increasing its dividend payout makes it a standout in the world of income investors. And right now for that consistency, 3M is willing to give you 2.72% for your participation as a shareholder. Nice, right?
Still, as someone looking at MMM stock as an investment in today’s market, as much as dividends can be a testament to a company’s financial wherewithal, I’d gladly forfeit that payout in favor of some overdue capital gains on the price chart.
MMM Stock Weekly Chart
Like much of the market and most large cap blue-chips, 3M’s gain from the ubiquitous late-December bottom is nothing to sneeze at. But my observation is MMM stock isn’t nearly finished. In fact, shares appear due for a period of relative and absolute out-performance.
As the provided weekly chart shows, MMM stock has also woefully underperformed the market over the past 15 or so months. While the Dow Jones Industrial Average has clawed its way back near its all-time highs, shares of 3M still have a good amount of ground to cover before enjoying that same feat. But if I’m correct, MMM stock is close to making that move.
Bottom line — or more aptly, the squiggly price line — MMM put in a good deal more consolidation work preceding the broader market’s own V-shaped bottom by establishing a more durable double-bottom pattern backed by key Fibonacci and moving average support. That’s bullish. And now shares look nearly ready for a nice-size capital gains payout.
Trading MMM Stock
For like-minded investors bullish on 3M’s price chart, I’d suggest waiting for shares to reclaim last week’s high of $216.49. That’s 10 cents above the high of the double-bottom base set back in September and offers investors a second opportunity at buying a pattern breakout. I’m anticipating that would definitely be bullish. But that’s not all either.
With 3M’s pattern high set against the 50% retracement level from 2018’s year-long correction, buying shares as they clear pattern resistance looks all the more compelling for some upside momentum and relative strength to work their way into MMM stock.
For containing risk, I’d use a stop beneath last week’s low of $209.26. That keeps exposure in MMM stock to 3.3%. That’s manageable and avoids a possible failed breakout which could lead to a much larger price drop in 3M shares.
If things go as planned, upon a breakout, a rally to test the 62% level might be considered for taking initial profits. But don’t forget, we’re interested in 3M’s potential for outsized relative and absolute performance. As such, use a Post-It if needed, and remind yourself to be patient and get ready to ride the trend in MMM stock back to $255 and beyond!
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
