Old Republic International (NYSE:ORI) is an insurance company, founded in 1887 and based in Chicago, Illinois. The company has been showing healthy earnings in recent years, which should be seen as a good sign for the company’s stock. However, the market has a habit of surprising investors just when they least expect. Just recall that Old Republic’s business was looking strong in 2007, as well, but this did not prevent the stock from plummeting by over 70% by 2008. That is why we prefer relying on the Elliott Wave Principle, which is a forecasting method based on price pattern recognition. It is applied to the monthly log chart of Old Republic’s stock given below.
As visible, prices have been rising in impulsive fashion between March, 1976 and January 2007. Within wave I of the impulse we could see three smaller degrees of trend. The wave structure of wave III is also easily recognizable. It all came to an end when the ending diagonal in wave V completed the entire pattern at $23.74. Almost ten years later, shares of Old Republic still have not managed to recover to the 2007 highs. And as the above-shown chart suggests, the new all-time high is likely to be postponed even more. According to the theory, a three-wave correction follows every impulse. So far, it looks like waves A and B have fully developed so it follows that wave C down should be expected. In other words, another plunge below the 2008 low of $6.77 is very likely. Compared to current prices above $18 a share, we can conclude that Old Republic might lose more than 60% of its market capitalization, before the uptrend finally resumes in wave (III). If this is the correct count, investors should get ready to relive the 2008 nightmare all over again.