Chart of the Day – $SODA Popped

by Enis October 30, 2013 1:12 pm • Commentary

SODA was one of our favorite stocks on the long side in 2013 (see here, here, and here).  We haven’t traded the stock in more than 2 months, but today’s price action caught my attention.   The stock is testing its 200 day moving average for the first time all year, currently trading right on that level:

SODA daily, 200 day ma in black, Courtesy of Bloomberg
SODA daily, 200 day ma in black, Courtesy of Bloomberg

While the test of the 200 day ma is intriguing, I still view the 54.50-55 area as the crucial spot of support for SODA.  That was resistance early in 2013, and the breakout area in May, which held as support in mid-July.

However, the long-term picture for SODA looks more ominous after the past 6 months of price action.  The stock has now pulled back from around $80 twice in the past 3 years:

SODA monthly, Courtesy of Bloomberg
SODA monthly, Courtesy of Bloomberg

The company’s earnings report was received poorly even though the actual numbers were not terrible (though the growth in operating expenses and higher inventories are a concern).  Overall, this stock is still a battleground, with short interest over 40%, but long investors excited by the 25x P/E for expected earnings growth greater than 20% annually.  Of course, SODA is still only a $1.2 billion market cap company.  Whether that’s a positive for a potential acquirer, or a negative given potential competition from the big boys, only time will tell.  In the meantime, I have my eye on $55, and the closer the stock approaches that area, the more interested I’ll become in a potential trade.