Lancashire Holdings shares were heavily penalized and are coming back to a significant level that might allow prices to rally again.

From a fundamental viewpoint, the insurance company shows attractive valuation and profitability levels. The stock is undervalued with a P/E ratio of 7.93x for 2014 and 7.75x for 2015. Net margin is valued at 22.5% this year. Moreover, analysts consensus targets a gain potential of 32%.

Graphically, we can see that the stock is in a bearish trend with decreasing moving averages. The security fell sharply towards the GBp 515 support and the downward trendline. Those levels are likely to allow a technical rebound and facilitate the stock appreciation.

Investors could take a long position to target the GBp 552 pivot point then the GBp 591.50 resistance. A stop loss should be placed below the GBp 515.00 support, threshold that would invalidate the bullish strategy.