MMM – Why We Like 3M Innovation For High Frequency Trading Strategies

 

3M Company
3M Center
St Paul, MN 55144
United States
Phone: 651-733-1110
Fax: 651-733-9973
Website: http://www.3m.com

Details
Index Membership: Dow Jones Composite
Dow Industrials
Sector: Conglomerates
Industry: Conglomerates
Employees: 87,677

3M Company is an innovative and diversified technology company that offers products like: Tapes, post its, adhesives, filtration energy control, acoustic systems products, and components used in vehicles. It also has a healthcare segements that offers surgical supplies; skin health and infection prevention, dental and orthodontic, and food safety products; inhalation and transdermal drug delivery systems; and health information systems.

Its business segments include:

  • Health Care segment
  • Industrial and Transportation segment
  • Consumer and Office segment
  • Safety, Security, and Protection Services segment
  • Display and Graphics segment
  • Electro and Communications

What does this mean?  It means 3M is a pretty diversified company.  Investors have known for a long time about the diversity of this stock and how correlated it is to the market.

Although the market is often driven by individual sectors, 3M has been used as a bell weather stock for many years and is showing signs that it still is.

Right now the 3M chart looks as follows:

3m All Time Day Trading Chart

As you can see, MMM is breaking out to new highs after the correction in 2008.  It appears to be lagging the market, however this says to us that it may just be lagging in a specific industry (like bio tech)  We feel that this is a strong indication that the current new bull market may be sustainable.  Of course, we always prefer charts to test their support at least once for confirmation when exuberance is modest.

An Entry on this time frame would leave an investor with a risk reward of close to $20 downside, so this means the profit target would need to be around $150 for a chart like this on the upside.

Now Let’s Look At The 3 Month:

3m 3Month Chart with Hammer Candle

Notice the Hammer candle and support at $108.  This is a clear indication of a reversal in most day trading charting strategies.  With the rise above $112 it could allow intraday traders to take advantage of a daily up swing, as well as algos to increase the buy side of their HFT trading strategies.  We would like to see it strong above $120, but would consider a long here with a stop below $107.37.  This means for the trade to be 2-1 in risk reward (ignore frequency of profitability) we would need a profit target of at least $123.00.  There is also the short potential of shorting below 108 to get out at 104 with a very tight stop loss if the stock begins to falter.

The set up here is by no means magical, but we have always liked 3M as a way to gauge the overall market.  The best way to use these charts is to see how they fit into your other investment strategies (perhaps just as an indicator) and see if you can find a correlation.

Please remember, we do not offer advice, we just point out where there may be opportunity.

Happy Trading.

 

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