Ingersoll-Rand Plc is a diversified industrial company with long history. It was established in 1905 as a result of the merger of two even older companies – Ingersoll-Sergeant Drill Company and Rand Drill Company – both founded in 1871. It is hard not to admire a company, which has managed to survive all the disastrous events the market cycle has been putting it through for well over a century. The last stock market crash, for instance, caused Ingersoll-Rand stock to plummet from 44.76 to 9.05 dollars a share between July 2007 and March 2009, but the company recovered and its shares are currently hovering around 67.50, close to new all-time highs. Unfortunately, this is usually not a good time to invest in a stock and, according to the Elliott Wave Principle, Ingersoll-Rand seems to be no exception.

The theory says that the direction of the trend can be identified by recognizing a five-wave pattern, called an impulse on the price chart of the financial instrument in question. As visible, Ingersoll-Rand’s uptrend began back in 1970 and, 46 years later, its five-wave pattern appears to be in its final stage – wave (5) of V. From an Elliott Wave standpoint, this is a reason for concern, because every impulse is followed by a same degree three-wave correction in the opposite direction. Typically, corrections tend to terminate near the support area of the fourth wave of the corresponding impulse. In other words, we should expect a major three-wave decline, which should erase all of wave V’s gains. In our opinion, instead of buying the stock at current levels, investors should avoid Ingersoll-Rand stock like the plague, because it is likely to crash all the way down to the levels of 2009. A $60 sell-off looks highly probable.

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