The Houston, Texas-based company engaged in hydrocarbon exploration, Cabot Oil & Gas Corporation (NYSE: COG) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, COG has been trading within a falling wedge pattern during the past few weeks. This is marked in the daily chart in pink color. Currently, the stock has broken out of the falling wedge pattern. A Falling Wedge Pattern is a bullish pattern. Once the stock breaks out from it, it has the potential to move further up.
Daily Chart – COG
#2 MACD above Signal Line: The daily chart shows that the MACD line (blue color) is currently above the signal line (orange color). This is a possible bullish setup.
#3 Above MA: In the daily chart, the stock is currently trading above its short-term moving average of 50-day SMA.
This implies that the bulls are currently in control.
#4 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) as well as the ADX lines are currently above (-DI), and ADX has started to rise from below both (+DI) and (-DI).
These point to a possible upmove in the near-term.
#5 MACD-Price bullish divergence: The weekly chart shows that there is a bullish divergence between MACD and price.
While the price formed a lower low, the MACD formed a higher low. This divergence is marked as pink color dotted lines. This is a possible bullish sign.
Weekly Chart – COG
#6 Bullish Stochastic: The weekly chart shows that the %K line is above the %D line in the stochastic. The indicator is also moving up from oversold levels. All this indicates that an upmove may be imminent.
#7 Bullish MACD: The MACD line is currently above the MACD signal line in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for COG is above its 200-day moving average. This translates to a buy price of around $19. The entry-level for the trade is marked as a green dotted line in the daily chart.
TP: Our target prices are $25 and $30 in the next 4-6 months.
SL: To limit risk, place stop-loss at $15.50. Note that the stop loss is on a closing basis.
Our target potential upside is 32% to 58% in the next 4-6 months.
For a risk of $3.50, our target rewards are $6.00 and $11.00. This is an almost 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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