Todays Big Stock: SodaStream International Ltd. (NasdaqGS: SODA)

Sodastream International Ltd., along with its subsidiaries, is engaged in developing, manufacturing and marketing home beverage carbonation systems and related products. Sodastream develops manufactures and sells soda makers and exchangeable carbon-dioxide (CO2) cylinders, as well as consumables, consisting of CO2 refills, reusable carbonation bottles and flavors to add to the carbonated water. Its products are sold under the Sodastream name in most countries, and under the Soda-Club name or select other names in certain other countries. The company sells its products, through more than 35,000 retail stores in 39 countries.

Sodastream released their quarterly earnings report back on August 11th and handily beat their estimates. Unfortunately, future guidance was not received well by the market and the stock sold-off. I guess you could say that SODA has definitely popped, but just lower. How much lower can the stock go? When might be a good time to buy?

Please take a look at the 1-year chart of SODA (Sodastream International, Ltd) below with my added notations:

As you can see, it’s been rough sledding for SODA over the last couple of weeks since the company released their earnings (red).  I might have thought the stock would try to hold $50, but no dice. The next level down of $40 (green) did act as support on the earnings day, but SODA has since broken that level as well. Currently, the stock is holding under the $40 level. If SODA could break back above $40, the stock should move higher. However, a lower move would bring the levels of $35 (blue) and $30 (purple) back into play for a trade.

The Tale of the Tape: SODA has experienced a drastic sell-off since the release of their earnings report a few weeks ago. Currently, $40 is the important level to watch. If you are bearish on the market and/or SODA, a short trade on a move up to $40 make sense. However, if you are watching for a long trade, a break above $40 or a pullback to $35 would make sense with a stop below the level of entry.

Side note: If a long entry is made at $35 and that level was to break, another short play could be made. The next long entry would be on a fall to $30.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT