I held 3M Company (MMM) in my portfolio a while ago and sold it after it did nothing. I was caught in that dreaded long sideways channel from 2003 to 2007. Now, 3M might be breaking out now but I’m left wondering where the volatility has been? Looking at daily volatility for the past 10 years, I see that last notable positive volatility spike (+4.53%) which occurred on April 24, 2007. The last large negative volatility spike (-8.26%) occurred on July 7, 2006.
Although we know that periods of low volatility is followed by periods of high volatility, I just don’t see high volatility supporting a breakout over the past month. Perhaps this is a false breakout? Checking the volatility histogram we see that when things go good, 3M has a 0.02% chance of seeing a 5.9% move. Conversely, when things go bad at 3M, they go really bad. The chances of that -8.26% sell off happening in 3M was less than 0.01%.
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