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Key Takeaways
- 3M shares recorded their largest ever one-day percentage gain on Friday after the maker of Scotch tape and Post-it Notes reported better-than-expected quarterly results and boosted its full-year profit outlook.
- The share price broke out from a pennant pattern on the highest weekly trading volume since early March, indicating a continuation of the current uptrend.
- Amid further upside, 3M shares may encounter overhead resistance on the chart at key levels including $128, $152, and $175.
- A pullback could see the shares revisit the $106 area, where they would likely attract buying interest near the stock’s initial breakout point and the March 2020 pandemic low.
3M (MMM) shares soared Friday after the maker of Scotch tape and Post-it Notes reported better-than-expected quarterly results and raised its full-year profit forecast, as the conglomerate reaps the benefits of cost-reduction measures and focuses on expanding its footprint into high-growth businesses.
Below, we take a closer look at 3M’s weekly chart and turn to technical analysis to point out important levels to watch following the stock’s post-earnings pop.
Pennant Pattern Breakout
Since forming a double bottom on the chart between October 2023 and February this year, 3M shares have continued to trend higher. Last week, the price broke out from a two-month pennant pattern and closed above the closely-watched 200-week moving average following the company’s strong earnings report. Typically, a pennant, which consists of a consolidation period within converging trendlines, indicates a continuation of the stock’s uptrend.
Importantly, the breakout occurred on the highest weekly trading volume since early March, indicating participation by institutional investors, such as hedge funds and asset managers.
The stock gained 23% on Friday to finish at $127.16. It marked the largest-ever one-day percentage gain for the stock.
Monitor These Key Levels Amid Post-Earnings Buying
Amid further upside in the Dow component, it’s worth keeping an eye on three specific price levels where 3M shares may run into overhead resistance.
The first sits around $128, less than 1% above Friday’s close, an area on the chart where the price may encounter selling pressure near a multi-year horizontal line connecting multiple peaks and troughs between August 2019 and August 2022.
A close above this level could see a test the $152 level, where the shares could find overhead resistance from a trendline linking a series of important price points from October 2018 to January 2022.
Ongoing buying may fuel a move to $175, where investors who have purchased earlier in the uptrend may look to offload shares near the prominent May 2021 swing high.
Watch This Important Chart Level During Pullbacks
Given the relative strength index (RSI) flashes extremely overbought conditions above the 80 threshold, investors should also monitor the $106 level during pullbacks, a region on the chart likely to attract buying interest near the stock’s initial breakout area and the March 2020 pandemic low.
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As of the date this article was written, the author does not own any of the above securities.