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TheStreet Open House

A Relative Strength Play That Could Sparkle: SodaStream

Stocks in this article: SODA

 DELAFIELD, Wis. (Stockpickr) -- When the market is selling off significantly, as they were were on Monday, I like to scan the equity universe for stocks that are bucking the trend and not going down. Being a trend trader, I want to find which stocks are counter-trending compared with the overall market weakness, because those are the names that are displaying relative strength and could be gearing up to trend significantly higher.

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If the bears can't gain any traction in certain stocks on the large down days, then it's possible that there just aren't any sellers left in those stocks. Of course, just because a stock doesn't follow the herd down on a big down day doesn't mean that the equity is ready to rise. It simply highlights a starting point to do further research on that stock.

The main attraction here is that any stock that doesn't get hit by the bears when they control the market could have something brewing underneath the surface. Stocks are driven by supply and demand, so I want to know exactly which stocks are in demand when the bears are hammering the market lower.

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One stock that I noticed that wasn't going down on Monday was SodaStream (SODA), which engages in the development, manufacture and sale of home beverage carbonation systems that enable consumers to transform ordinary tap water instantly into carbonated soft drinks and sparkling water. This stock has been hit hard by the bears over the last six months, with shares off by 35%.

SodaStream was in the news last week after Whirlpool's (WHR) KitchenAid brand announced that it would sell an at-home soda maker called the Sparkling Beverage Maker, developed by SodaStream. This product is set to go on sale in June at a suggested retail price of $249.99. This is one of what could be many deals that SodaStream is going to enter into soon to fight back against the recent collaboration between Coca-Cola (KO) and Keurig Green Mountain (GMCR) to develop their own at-home cold drink maker.

What's interesting about SODA not going down on Monday -- a day the Nasdaq dropped by over 70 points intraday -- is that this stock is a favorite target of the short-sellers. The current short interest as a percentage of the float for SODA is extremely high at 46.1%. This stock also sports a very low tradable float of around 20 million shares, so almost half of that float is sold short with over 8 million shares in the control of the bears. This is the type of situation that can produce monsters moves higher in very short timeframes if the bears get squeezed out of their positions.

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