Cabot Oil and Gas (COG) is a stock David & I highlighted in our summer webinars as a potential trade to the long side but one which would require patience and hence a stock to have on a watch list. The issue as always is that word patience, something as traders and investors we find hard to do at times, but as is often the way, it generally does pay off. And this is an even greater truism when a stock is in an accumulation phase as the market makers build their inventory in preparation for the development of the campaign higher, and often preceded with a test.
COG is a good example of the patience required, and on the daily chart, the key level of resistance was clearly defined at just shy of $18 per share with the red dashed line of the accumulation and distribution indicator as the price broke away from the VPOC (the yellow dashed line). The breakout through $18 per share and beyond moved COG into a low volume and on towards $23 per share, with only yesterday’s sharp move lower helping to take the gloss off the strength of bullish sentiment.
The time cycle of accumulation is not hard to understand. The stock price has fallen hard and fast and perhaps over an extended period. The market makers have to absorb all the selling pressure and if and until it is removed from the market a new campaign is unlikely to start since what they do not want is for sellers to reappear and stall the campaign. So a nice example with COG and one where patience has been rewarded.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
Great post!
Many thanks – Anna