Masimo Corporation (MASI) is a global medical technology company that develops and manufactures innovative noninvasive patient monitoring technologies, medical devices, and a wide array of sensors. Per the company website:

Masimo employs over 4,000 people worldwide, with annual revenues of approximately $700 million.  Licensing agreements allow Masimo technology to work inside monitoring devices from a host of manufacturers, including Philips, Atom, Datascope, GE Medical, Medtronic, Spacelabs, and Zoll.

Masimo’s mission, is to improve patient outcomes and reduce the cost of care by taking noninvasive monitoring to new sites and applications.

Masimo Corporation (MASI) – Bearish Engulfing Candlestick

This first chart is a 5 year monthly candlestick chart for Masimo Corporation (MASI). A Bearish Engulfing candlestick pattern developed in May 2017 that started a downtrend for MASI. The 2 gray shaded boxes represent reversal areas for MASI’s share price. These reversal areas can also be used to make scale-in purchases.

The resistance area from the Bearish Engulfing candlestick pattern is right on the 261.8% Target Line from the green Fibonacci Extension Tool. The 261.8% Target Line is the target for an extended rally.

MASI developed this bearish candlestick pattern at the end of an extended rally. The bearish candlestick pattern was confirmed by[s2If !current_user_can(access_s2member_level1)]……

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Its current downtrend is reviewed with 2 highly probable support areas identified. These 2 support areas could be used to make scale-in purchases and build a position in Masimo Corporation (MASI).

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)] selling volume that was greater than the previous months volume. On its first attempted rally it fell short. It is not continuing its downtrend.

It looks to be forming a classic Zig-Zag wave pattern, similar to what the NASDAQ Composite did back from July 2015 to February 2016.

Even with all that negativity, there is a possible reversal area in the $75 – $78 price range. I am thinking the $75 – $78 is a bounce trading opportunity, nothing more. Let’s review some other technical analysis methods and see if they agree.

MASI – Point & Figure

A Point & Figure chart can help provide confidence to your previous analysis or it can make you re-think your previous analysis. The high/low and the closing P&F Charts for MASI indicate bearish price objectives. This is the P&F chart based on closing share prices for MASI. It has a $68 bearish price objective.

The high/low P&F Chart for MASI is not much different. It has a $65 bearish price objective.

Bearish price objectives of mid $60’s seem to agree with the 161.8% Target Line from the red Fibonacci Extension Tool on the above 5 year monthly chart. The 161.8% Target Line calculated a downside price target of $64.40, almost perfectly in-line with the Point & Figure price objectives.

MASI – Moving Averages

This chart for MASI is a 2 year daily candlestick chart. I normally use a 1 year chart for moving averages, but I wanted to capture MASI’s previous re-test of the 200 Day moving average in the chart view.

I also left the red Fibonacci Extension Tool from the 5 year monthly chart on this chart. It is the one that calculated the $64.40 downside risk area. Notice how its 161.8% Target Line falls right in between the 50% and 61.8% Retracement Lines from the black Fibonacci Retracement Tool?

If MASI is in the process of correcting its uptrend, then the 50% and 61.8% Retracement Lines offer high percentage areas for a continued pullback. That pullback area seems to be confirmed by the red 161.8% Target Line and its $64.40 price target.

The 2 large volume spikes associated with this current downtrend are the largest selling spikes since the uptrend began. These selling spikes seem to suggest a longer correction period is underway. Watch to see if MASI’s share price stays above the 200 Day moving average over the next couple of days.

The last test of the 200 Day moving average was a little over a year and a half ago. It spent a little time under the 200 Day and could be a blueprint for the upcoming test. It looks like MASI’s share price could be doing the same this time – spending a little time under the 200 Day moving average.

MASI – More Bearish Engulfing Candlesticks

This last chart for MASI is a 3 year weekly candlestick chart. Since the MACD Histogram on the above monthly chart was showing a slow-down in buying momentum I think its important to monitor the MACD on a shorter-term chart too.

The MACD Histogram seems to be identifying a definite longer-term correction period for MASI as it has selling momentum for the last several weeks. Wait to start building a position until there have been at least 2 consecutive weeks of selling momentum that has been decreasing. That is the minimum wait period to try and eliminate some trading risk.

There are also 3 Bearish Engulfing candlestick patterns that I pointed out on this weekly chart. All 3 developed on selling volume that was greater than the previous months volume. That also seems to confirm a longer correction period.

Waiting for confirmation of a new uptrend would involve waiting until MASI’s share price broke through its overhead trendline resistance. And as noted above, it would involve waiting for at least 2 consecutive decreases in selling momentum on the weekly MACD Histogram indicator.

Masimo Corporation (MASI) – Summary

It was mentioned during the stock request for Masimo Corporation (MASI) that it was a recent Motley Fool recommendation. The recommended buy price was not mentioned, but I think that share prices for MASI can be had at lower prices. And isn’t that exactly what you want? To buy something on sale?

There seems to be building evidence of a pullback to the mid $60’s, but a reversal area also sits right beneath the current share price. Making scale-in purchases at 2 different reversal areas is a sound strategy in building a position in a stock.

25% around the $75 price level

50% around the $65 price level

25% at your discretion, possibly trading

That is one possible scale-in strategy that can be used for MASI. I consider it a general type scale-in strategy that can work with a wide range of stocks.

If MASI drops to the $75 price area, look for signs of a rebound trade or possibly even a reversal. Another option, drop by the Idea Chamber and ask for an update. Until then, I think a little patience is key with this stock. But if the Motley Fool is high on them because of some fundamental reasons, scaling into shares as outlined above could lead to some nice profits. I would use the $65 and $75 as 2 key scale-in areas.

Good luck trading!

On deck: Quick Hits for SIRI & IAG

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