What do we like about SodaStream (SODA) besides the bubbles? Actually, I prefer bubbles in champagne.
In any case, both the daily and weekly chart in this stock show a bullish pattern of higher highs and higher lows. On the daily chart above, where I have illustrated my trade setup, you can see that SodaStream is clearly above both the 200-day and 50-day simple moving averages. Whenever you look at the buy side in a stock, you ideally want to have these averages on your side, as this increases the probability for a winning trade setup.
Now that we've considered pattern and a couple of filters in the way of moving averages, let's take a look at the actual trade setup.
One of the main components of this setup is what I call "symmetry" -- similarity or equality when comparing swings in the same direction. These 100% projections of prior swings are called "measured moves" by other technicians. In the case of SodaStream, I have identified a prior $11.35 corrective decline that into the November 2012 low. By projecting 100% of this pullback from the June 2013 high, I've identified a possible support level.
Beyond this one major projection, I am seeing a confluence of at least two other price projections -- two price extensions of prior swings, along with at least two retracements. This creates what I call a "Fibonacci price cluster," or the coincidence of at least three or more price relationships that come together within a relatively tight range. This particular cluster is identified at the $65.19-to-$66.45 area, and so far SodaStream has hit a low at $66.64 on June 24 -- directly within that cluster. It looks as though the "aggressive" trigger chart (which, for me, is a 15-minute) has fired off a buy signal. (For more on that, please refer here)
To recap: This setup entails a buy against the $65.19-to-$66.45 area. Maximum risk can be defined below the $65.19 level, with a stop at $64.19 in order to give it a little room. If the most recent low remains intact, the first upside target will come in at $80.90.
One more thing to watch, finally, is a resistance hurdle between $72.10 and $73.45. If SodaStream approaches that level, it'll be a good time at least to move the breakeven stop on the trade.
I will consider myself wrong in the trade if the stock drops at least $1 below the cluster zone.
For more information on trade triggers, please refer here.