SodaStream International (SODA), the famed manufacturer of home beverage carbonation systems, received some positivity from hedge fund manager Whitney Tilson of Kase Capital. In his note to investors, he cautioned that Sodastream’s products shouldn’t be considered a “fad” and that, in his opinion, the most lucrative market for the company and SODA stock is in western Europe.
That is one man’s opinion, and sure, that’s good to know. More importantly, from an active investing and trading standpoint, is that with Whitney Tilson’s position in SODA stock, there is bound to be more heated discussions around SODA stock, and that could get things moving again.
In many respects, SODA is exactly the type of stock that active investors can routinely find profitable opportunities in. For one, the stock (most of the time) exhibits a good amount of volatility, yet also respects technical analysis and thus its support and resistance levels of various sorts. Since Sodastream’s initial public offering in November 2010, SODA stock has essentially already gone through two entire bull and bear market cycles and offered the proactive investor a plethora of opportunities.
Currently, SODA stock is once again at an interesting area on its charts, and particularly when coupled with the news of Whitney Tilson’s involvement in the stock, it makes Sodastream a company to follow.
Through the longer-term lens of the below chart which looks at SODA stock’s entire trading history, we note that the stock currently resides around the lower end of its trading cycle, which is supported by the black uptrend line. From here, the stock either completely falls apart and slices through the trendline, or the stock continues to consolidate and eventually works its way out of the blue bubble and back higher in a mean-reversion move slowly toward the red 200-day moving average over time.
With the bigger picture in mind, let us now turn to the closer-up daily chart, where we can map out somewhat more precise levels of support and resistance that could lead to good risk-reward trades.
First, note that earlier this week, SODA stock developed a higher low versus its late January lows. Then notice that on Thursday, on the back of the aforementioned Whitney Tilson news, Sodastream stock jumped 3.2% on the day and overcame a first level of resistance, which was a downtrend line dating back to last December.
SODA stock now sits at immedate resistance made up of a lateral line (red dotted) and the 50-day moving average. Should Sodastream be able to overcome this area — currently around the $42 mark — upside into the mid- to high $40s could open up.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.