Analysts, Options Traders, and Chart Data Push Bearish Narrative on MMM Stock

Put buying has hit extreme levels on the blue chip

Mar 22, 2019 at 9:48 AM
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3M Co (NYSE:MMM) yesterday gave a presentation that laid out the company's long-term financial objectives. While the stock initially experienced heavy selling, it eventually closed the day higher. Morgan Stanley apparently wasn't impressed, however, this morning dropping its price target to $199 from $201, saying the negative quarterly trends are backing up the company's January warning about a slowdown in end markets, most notably in China.

Pessimism has been picking up in the options pits, as well. In fact, MMM's 10-day put/call volume ratio is at an annual high of 2.01, showing there's been a much stronger-than-usual appetite for long puts over calls. A closer look shows the weekly 3/22 205-strike put saw a huge increase in open interest during the past two weeks, putting it second on the blue chip's top open interest positions list. These bears will be hoping the stock falls below $205 by today's close, when the weeklies expire.

Anyone looking to open new options positions on 3M should note that the security's Schaeffer's Volatility Index (SVI) of 17% ranks in the 18th annual percentile. In other words, volatility expectations are very low right now, indicating it could be a good time to buy premiums on near-term contracts.

Traders should also know that MMM shares continue to run into resistance at the 320-day moving average, a trendline that's acted as a stiff ceiling for months now. Schaeffer's Senior Quantitative Analyst Rocky White has data that shows the Dow component has run into this trendline three times after long periods below it during the past three years, and each time afterward the 21-day returns have been negative. 3M stock was last seen trading at $207.75.

 

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