Time to check in on one of my stocks from earlier in the year—Cabot Oil & Gas Corporation (NYSE:COG). If you are a regular reader of my analysis then you will know this was one where patience was required as the stock was in a phase of accumulation following a sharp move lower on dramatic volume.
This was triggered following a proposed merger which was confirmed last week. And that's the reason we saw 60m shares trade on the day, a dramatic increase on the average volume and evident on the daily chart.
While this was a massive surge in trading volume, it also added to the bullish sentiment for the stock which has been climbing nicely following the completion of the accumulation phase. The $18 per share level proved to be the key point offering a solid platform of support as the stock climbed higher and away from the volume point of control at just below $16 per share.
As we can see on the daily chart, the resistance at $18 per share is denoted with the red dashed line of the accumulation and distribution indicator and clearly a strong level as shown by the thickness of the line.
So what are we to make of the injection of volume on the 29th following the approval? Let’s take a closer look. The candle on the day was certainly wide, but in fact, only moved the price from $21.63 to a high of $23.10 per share before closing off the highs at $22.55 and with a wick to the upper body. The subsequent two days have seen the price consolidate which is no surprise given this sign of short-term weakness and some of this we can certainly surmise as evidence of profit-taking.
Yesterday’s volume was higher than usual at 19m but supportive of the price with the buyers stepping in, and the key now is how long can we expect the stock to congest as the ripples from the merger settle and volume returns to normal. From a personal perspective, I am expecting sideways price action for a few more days yet, before we see the stock price push higher once more. The next key level is $23/$23.50 per share, which will take out the high of the Sept. 29 candle, supported by the trend monitor indicator which is blue.