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CANDLESTICK CHARTING


3M Sports A Shooting Star

11/07/08 09:07:14 AM
by Arthur Hill

3M formed a shooting star at resistance, and the upside looks limited for this Dow Jones 30 component.

Security:   MMM
Position:   N/A

Figure 1 shows 3M (MMM) with a rising wedge advance back to broken support. There are two things to take away from this picture. First, broken support often turns into resistance. With a doji, a shooting star, and a long black candlestick over the last three days, resistance is earning its keep. Second, rising wedges are typical for corrective patterns. A break below wedge support would signal a continuation low of the prior decline.

FIGURE 1: MMM, DAILY. Note the rising wedge advance back to broken support.
Graphic provided by: TeleChart2007.
 
Volume increased as the stock weakened. The last two volume bars show a surge in volume as the stock declined. Volume bars are red on down days and black on up days. This shows an increase in selling pressure and furthers the bearish argument. The bottom indicator shows the on-balance volume (OBV) breaking its October trendline to confirm the recent increase in selling pressure.

FIGURE 2: MMM, DAILY. The shooting star reflects an intraday surge that failed to hold.
Graphic provided by: TeleChart2007.
 
Figure 2 focuses on the wedge and the shooting star (red oval). The shooting star reflects an intraday surge that failed to hold. MMM shot above 67 during the day but could not maintain these gains and it closed weakly. The stock broke the lower trendline of the wedge with further weakness the next day. Despite this decline, there is still support around 61 from the late October lows. A break below this level would finalize the wedge break to signal a continuation lower. The October lows mark the first downside target after a support break.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
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E-mail address: arthurh@tdtrader.com

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