Ingersoll-Rand (IR) was downgraded Monday by a prominent Wall Street firm, but the price chart looks to be in good shape and could head higher after a pause.
One of the older sayings on Wall Street is to "let your profits run." While this sage advice seems to be ignored by financial advisers who want to reduce positions on investments that become overweighted because of performance, I still try to practice it. In this chart of IR, above, we see a lopsided double bottom pattern. The first low is in October at $50. Prices rally until November, and in January/February we have a retest of the first low. Prices do break $50 a little but this does not precipitate a leg lower. The On-Balance-Volume (OBV) line turns up in February. Prices rally over the 50-day moving average in February and the 200-day average line in March. There is a bearish divergence on the chart above. From late February until now, IR makes new price highs but there are lower momentum readings. This is bearish but not major, and after breaking above the November highs, I would only anticipate a shallow reaction lower at this point in time.
In this longer-term weekly chart of IR, above, we can see prices have rallied above the 40-week moving average line. The average line has not yet turned up, but the OBV line is edging upward on this time frame and there is a weekly bullish divergence in the bottom panel.
This last chart, above, is a point-and-figure chart of IR. The stock has climbed straight up from $49 on this chart and could be considered "extended" and prone to a pullback. A move to $63 would be very bullish on this chart and give us an upside price target of $87. This is a pretty ambitious target and a breakout over $70 is needed first, but it is just the kind of technical setup where we should "let our profits run."