MMM - Discount Buy or No?Find the commentary from the chart below:
In general, the stock paints a bullish picture but there are also things that could indicate that it would rather trend downwards at least for some time.
Bullish points
-Stock is currently above the 120 moving average which has served as a support level since 2011 on weekly chart
-Stock is currently In an uptrend and hence current downward move may be a correction and oportunity to buy in the larger trend
-The 188 support level is intact, and has held since it was formed & the short term resistance level at 212 just got broken last week and so there is some bullish interest in the stock
-Dividends have experienced increase by 15% this year (from 1.11 -> 1.18 last year -> 1.36 now this year for each quarter)
-Quarterly actual earnings and earnings estimates have all been growing along with stock price and hence it can be inferred that the company is expanding and may continue to be profitable for at least the next few years (longterm outlook idea)
Bearish points
-The price behavior with 120 moving average this time around has been sharper, larger and more aggressive this time around without truly breaking and testing 120 moving average; this could mean the moving average break is rather yet to come and so more patience should be had (if so an entry with a smaller position can be made, and then more size added as trade begins to work)
-Stock has a long way to break out of 255 in order to confirm uptrend, but waiting for price to reach there from its current price at ~212 would mean you would miss the uptrend move in this case; this could be a good idea to exercise patience, but the aggressive correction I already mentioned could mean the very early stage of a shortterm downtrend at least with 255 being the peak price (simply put, because of the price behavior, you would be safer buying from support and deciding to add or close trade after stock reaches 255 rather than waiting for move to 255 and then buying into breakout).
-The 188 support level has been intact since it was formed, but it can break with pressure of earnings & a true test of 120 moving average; if these price tests occur and are strong enough, it could set the stock up for a downtrend.
-Dividends and earnings growth may indicate future longer term growth and NOT shorter term price action; even though the "numbers" of the company may look nice, it may be moving upward now as a sympathy play since sector (XLI') is also doing well right now.
(This stock will not be traded as part of paper portfolio challenge)
Let's follow MMM' to see how it plays out!
Thanks!
