SODA Going Downstream?

 | Nov 22, 2013 | 6:00 AM EST  | Comments
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Today I'm going to share a bearish case for lower prices in SodaStream International (SODA).

First, all the daily moving averages support a short setup at this point. Price is below the 200-day and 50-day simple moving averages. We also see the 5 ema below the 13 ema. Second, the pattern of the daily chart is a bearish pattern of lower lows and highs. That also says the trend trade setup is on the sell side.

 

SodaStream International (SODA)
Source: Dynamic Trader

 

Now for the setup. I see key price resistance in this one between $58.58-59.30.  This zone includes a .618 retracement of the prior swing, along with two 100% price projections of prior rally swings. Also note that I have time resistance to this last rally. You can see this resistance illustrated by the pink histogram below the chart. That histogram represents a cluster of timing cycles that are also suggesting a possible reversal to back down.

Notice the symmetry that the last swing up has in common with a prior swing. I have illustrated this on the chart below. You can see that the most-recent rally lasted 11 trading days and $6.79. This is very similar to a prior swing of 12 trading days and $6.80. That counts as some natural resistance. Bottom line, as long as price remains below the $58.50-59.30 area, I will take sell triggers in this one.

Target 1 for this setup comes in at $49.85. Target 2 would be $47.50 and Target 3 would come in at $40.71. I already have a put spread in this name.

I will consider myself wrong the trade if the price cluster of resistance is taken out. 

I like the risk/reward on this one and the fact that it is clearly defined when I would be considered wrong. One thing I want to remind you about. Since we don't always get our targets, I would recommend that you trail stops down if the trade starts to play out in your favor. 

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