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Ingersoll-Rand: A Dangerous Dip to Buy

In less than two years, Ingersoll-Rand’s stock more than doubled. The price was down to $47.08 in January, 2016. On October 24th, 2017, it touched $96.23 for a total return of 104.3%, not counting the dividends. Anyone, who managed to catch this rally from the start is probably very pleased with the result.

The problem is that no trend lasts forever. All good things eventually come to an end. IR stock is currently hovering near $85.70, down by over $10 a share from the all-time high, and trying to seduce investors, who follow the popular “buy the dip” strategy. But is this a dip to buy in order to take advantage of the upcoming resumption of the uptrend, or the beginning of a much larger decline investors should avoid? Let’s apply the Elliott Wave Principle to the daily chart of the stock below and see if we could find the answer.
ingersoll-rand elliott wave analysis
The daily chart shows that Ingersoll-Rand’s rally since January 2016 has developed as a complete five-wave impulse. According to the theory, every impulse is followed by a three-wave correction of similar size in the opposite direction. Even if we forget about the other time-frames and concentrate only on the daily chart here, we should still expect more weakness.

Unfortunately, 13 months ago we published an analysis of IR stock’s monthly chart. It suggested that once wave (5) of V was over, a major correction could be expected. Well, wave (5) of V seems to be complete now. It is the same pattern that led to an 86.2% selloff in Hibbett Sports stock. In December 2013, such a crash in Hibbett seemed to be just as unlikely as it is in Ingersoll-Rand now. Yet, it happened. Of course, it could be different this time since Ingersoll-Rand is a much bigger and well-established company. We would not count on it, though…



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