Cabot Oil & Gas Corporation (COG), a Houston-based oil and gas company, is ready to break out. The company's share price is stuck in an ascending triangle pattern. This pattern forms when we see a rising support line for the stock hitting a strong horizontal resistance point.
Take a look:
The rising support trend line in green is converging with the horizontal resistance level in red. A breakout is imminent, and once it occurs, prices are set to pop or drop by more than 20%.
Triangle patterns are my favorite to trade because they give us clear levels to watch. They also give us a clear price target once a breakout occurs. In this case, the green and red lines are the key levels to watch. Once the price breaks below the green line or above the red line, we can expect a sharp move to take place.
The expected move for Cabot Oil & Gas is $6.50 per share. We know to expect a move of this size because breakouts from an ascending triangle pattern are the same as the height of the pattern. The height is $6.50. Therefore, we can expect the breakout to cover the same amount.
Based on this analysis, if prices break below the green support level, they will quickly fall to about $19.50 per share. And a breakout above the red resistance level will send the stock to $33.50 per share. Either way, the breakout in Cabot Oil & Gas is set move the share price 20% or more in quick fashion.
But there’s one more thing an ascending triangle patterns tell us – the direction of the breakout. While it is still uncertain, most triangle patterns are known as continuation patterns. That means they move in the same direction that the stock was trending in before the pattern formed. In this case, Cabot Oil & Gas has been trending higher since 2016, meaning that this stock should break out to the upside in the coming weeks.
The Bottom Line
Cabot Oil & Gas stock is setting up for a nice breakout. It has formed an ascending triangle pattern, which indicates that shares are set to move 20% or more in quick fashion. Most of these triangles are continuation patterns, which tells us to expect the stock to move higher. Watch the stock for a breakout above its resistance level for confirmation.