Masco Corporation (NYSE:MAS) was founded in 1929 – the year the Great Depression started. The company survived and prospered during the next 90 years and seems to be in a healthy shape in 2019. People will always need home-improvement products and Masco will probably be around for many years.
However, as the prospects for the global economy get darker, is it time for investors to put their money in Masco stock? This is the question we hope to answer with the help of the Elliott Wave principle and the chart below.
Masco’s weekly chart reveals the stock’s entire progress from $3.20 in March 2009. Ten and a half years later, MAS closed at $42.51 last week, up 1228% since 2009 excluding the dividends. To put it mildly, the last decade has been very generous to Masco shareholders.
Masco‘s Uptrend Coming to an End?
However, extrapolating the past into the future can be very dangerous in the stock market. No trend lasts forever and the chart above suggests Masco’s won’t either. It shows that the rally from $3.20 has taken the shape of a five-wave impulse whose wave 5 is currently developing.
Wave 5 is supposed to exceed wave 3 and reach a new all-time high near $50 a share. This means Masco can add another ~20% to its market value in the short-term. Unfortunately for the bulls, the theory states that a three-wave correction follows every impulse.
Once wave 5 is over, a corrective pullback can be expected to drag the price back down to the support area of wave 4 near $25. If this count is correct, the anticipated recession can erase roughly 50% of Masco’s market cap. Not that bad compared to the 2005-2009 period when it lost 90.5%.