Sometimes it may be instantaneous and sometimes it may take time, but downside volume coming off the high can be a very important indicator that somebody knows something and that something is not right with the company. At times, the indicator can give false positives, but at the very least it should serve as warning to go back check your thesis and research the fundamentals again. Case in point 3M.
In yesterday's trading, 3M fell by more than 4% on nearly 6 million shares, above the average of about 3 million shares. This is after the company reported Q3 results that missed the analysts' estimated by $0.09 or 5.6%. In addition, the company cuts is guidance, not only for EPS but more ominously for organic sales growth (and you wonder why the company is making some large acquisitions.)
Now someone can make the case that this is new news and the stock is reflecting it. However, I would argue it did not come without warning. Outside of the slow operating environment, the heavy volume downside back in mid-September should have said "go back and do your homework". 3M's shares broke the 200-day moving average, on volume, in yesterday's trading and the next support level could be in the low $80's.
In yesterday's trading, 3M fell by more than 4% on nearly 6 million shares, above the average of about 3 million shares. This is after the company reported Q3 results that missed the analysts' estimated by $0.09 or 5.6%. In addition, the company cuts is guidance, not only for EPS but more ominously for organic sales growth (and you wonder why the company is making some large acquisitions.)
Now someone can make the case that this is new news and the stock is reflecting it. However, I would argue it did not come without warning. Outside of the slow operating environment, the heavy volume downside back in mid-September should have said "go back and do your homework". 3M's shares broke the 200-day moving average, on volume, in yesterday's trading and the next support level could be in the low $80's.
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