SodaStream International (SODA) has been on a nice bullish run, but we’ve been here before with this stock. In June and July of 2011, SODA topped out at about $77.50 before falling all the way back down to $30. Fast forward to today, and you will see that SODA has recently hit $77.50 and is now starting to pull back again. Now, we’re not anticipating an immediate drop back down to $30, like we saw in 2011, but we do anticipate the stock is going to continue falling.
Perhaps the most important news plaguing the stock right now is the fact that both Coca-Cola (KO) and Pepsico (PEP) have quashed any rumors that they are looking to buy SODA, even though SODA has been quietly trying to sell itself for the past few months. Anytime a stock gets bid higher in anticipation of a potential acquisition only to see those acquisition hopes dashed, the stock typically drops quite a bit lower. At this point, we are looking for SODA to drop back down to $50. The stock consolidated around this price point from January through early-May 2013 and should prove to be strong support as the stock drops back down.
While we do anticipate the stock will continue to drop during the next few days, we expect the company’s earnings announcement on Wednesday, July 31, before the market opens, to be an important catalyst in accelerating SODA’s decline. In other words, it’s time for SODA’s carbonated bubble to burst (we’re so sorry…we just couldn’t pass up that pun).
‘Buy to open’ the SODA August 55 Puts (SODA130817P00055000) for a maximum price of $2.95.
InvestorPlace advisors John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next trade and get 1 free month today by clicking here.