Today’s Big Stock: SodaStream International Ltd. (NasdaqGS: SODA)

SodaStream International Ltd., formerly Soda-Club Holdings Ltd., along with its subsidiaries, is engaged in developing, manufacturing and marketing home beverage carbonation systems and related products. Soda-Club International BV, wholly owned subsidiary of Soda-Club Enterprises N.V., which is the wholly owned subsidiary of the company, manages the company’s operational activities. SodaStream manufactures home beverage carbonation systems, which enable consumers to transform ordinary tap water into carbonated soft drinks and sparkling water. The company’s products include soda makers, CO2 refills, flavors and carbonation bottles.

To analyze SodaStream’s stock for potential trading opportunities, please take a look at the 1-year chart of SODA (SodaStream International Ltd.) below with my added notations:

 

 

The chart of SODA is interesting due to the presence of (2) converging support levels. First, the short term, up-trending support level (blue) has developed. Any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. As you can see, SODA’s trend line is important to the stock since it has been tested on (5) different occasions. Next, SODA has a very important price level at $40 (navy). The stock is currently sitting at both of these supports.

The Tale of the Tape: SODA has (2) support levels, both of which currently sit at or near $40. If the stock pulls back to $40 a long trade would be advisable. However, if the stock were to break below $40, thus breaking both supports, a short play should be made instead.

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