SDA

[Ramsburg]

Profile:
Sadia SA (Sadia) is a Brazil-based company involved in the food processing sector. It is principally engaged in the production of refrigerated and frozen food products. Sadia operates 14 industrial units and 16 distribution centers located in 14 Brazilian states. The Company's product line includes pork meat, cooked meat, poultry cuts, sausages, margarines, pizzas, soups, desserts and pasta. It has offices located in Germany, Russian, Japan, China, Turkey, Argentina, Chile and Panama, among others. The Company also provides packaging services. Sadia's subsidiaries include Sadia International Ltd, Big Foods Industria de Produtos Alimenticios Ltda, Sadia GmbH and Sadia Overseas Ltd.
Market Cap: $5.51B
Sector: Consumer Goods - Food
Website: www.sadia.com


Trading Idea:

Technical Analysis:
Since end January SDA has nearly doubled in price from $14 lows and seen solidly increasing volumes as it becomes more visible to the institutional community.  It has set up a nice pullback (just above $24) following volume breakout to all time highs (just over $26) with solid support from near term ascending line and previous breakout highs (see chart). This combination of technical factors provides a nice entry opportunity for expected continuation of the current ascending trend.

Fundamentals:
Brazil is the 5th largest Country in the World with rapidly increasing standard of living and economic growth. SDA sells around 54% of its product domestically and 46% export. Most exports are to Russia and Middle East, two other high growth areas. Sadia has seen solid revenue growth (around 15% pa over previous 5 years) and has robust guidance moving forwards. Further they have been active in acquisitions and joint ventures as part of their growth strategy.

Recent activities:
Sadia S.A. To Form Joint Venture with Kraft Foods
Sadia S.A. Announces Further Details of Acquisition of Avicola Industrial Buriti Alegre Ltda.–Goiaves
Sadia S.A. to Acquire Excelsior Alimentos SA Stake in Baumhardt Comercio e Participacoes Ltda

More information http://www.reuters.com/finance/stocks/keyDevelopments?symbol=SDA.N&timestamp=20080428205200&rpc=66

In essence this is a Brazil growth play via food with little or no influence from the US market!!

We are looking to ride the continued trend of SDA with a technically safe entry near to strong support. No profit target will be in place at this point.

Trading Plan:
Buy SDA at or near the open

[AussieTrader]

Update:

Friday's session was quite bloody. A combination of factors; OIL - weekly oil inventories reported by the Energy department dropped 1.5% and a Morgan Stanley analyst predicted oil may hit $150 in weeks. Plus the US employment report showed unemployment up 0.5% to 5.5% in May.  Not many stocks survived the downside impact of these catalysts as oil surged to $139 area. Generally the relationship is oil goes up stocks go down.

SDA was not immune and shed 5% from our entry price. However the reasons for our position in SDA have not changed. In fact food pricing to the consumer goes up as a direct result of higher oil pricing due to increased transportation costs.

Technically SDA broke the ascending support line (1 on chart). Not a total worry, but definitely a heads up watch me signal, especially in combination with the ugly market action. Price is still in near term support area (as noted by 2 & 3 on chart). Note 3 on the chart shows the 50 EMA (yellow) and the 50 weighted (light blue) this area is key to hold for the trade to remain attractive for us (see Note below). I anticipate further volatility following Friday's action, a hard stop will not be put in place today we will see what the market does next in its flip flop oil driven journey, but rest assured we will be quick to act if SDA is unable to hold the key support area.

Trading Plan:

HOLD SDA

Note: I sometimes use the same moving average with different calculation methods (Exponential, weighted, simple) on the same chart so that I have a view of support / resistance from a zonal point of view. I find it helpful for my technical analysis as it means I don't rely on just 1 calculation to gauge my analysis on. TA is not a science and you have to allow degrees of variance and interpretation.

[AussieTrader]

Update:

SDA tested the 50MA (weighted) finishing the day with a bottoming tail doji which confirms the support found in this zone. After a sharp lunchtime sell off and making a low for the day SDA spent the last 2 hours of the market rallying upwards closing slightly positive for the day. I would like to see SDA react positively or at least stabilize from this action. Any upside break of the descending short term resistance (marked on chart) would set up a nice continuation pattern. The trade plan remains intact, watching the 50MA zone as the key support for this trade.

Trading Plan:

HOLD SDA

[AussieTrader]

Update:

Technically SDA continued in a bearish way, gapping down and closing near low of the day. This is a disappointment, but it is what it is and now we must preserve capital.
The 50MA zone as mentioned before is key to hold. We will introduce a stop just below the 50EMA

Trading Plan:

HOLD SDA with a STOP at $21.80

[AussieTrader]

Update:
I would like to see SDA react positively or at least stabilize from this action. Any upside break of the descending short term resistance (marked on chart) would set up a nice continuation pattern.

Update:

Technically I got what I asked for a positive reaction from the identified support zone. In fact it was a super reaction based on the overall market condition of yesterday. I further said a break of the descending short term consolidation line would set up a very bullish scenario. You can see from the chart the momentum stopped at that resistance.

There are no external catalysts I have seen that could offer any insight into the price action other than from a TA perspective of support / resistance. The trading plan remains unchanged.

Trading Plan:

HOLD SDA with a STOP at $21.80

[AussieTrader]

I further said a break of the descending short term consolidation line would set up a very bullish scenario. You can see from the chart the momentum stopped at that resistance.

Update:

I think all I have to do is keep on asking for things and they will happen LOL.

SDA indeed broke that short term descending resistance following the strong bounce from the 50EMA zone. That is a very bullish follow through and 'should' result in continuation at best and stabilization at worst. I am comfortable with this trade, so no change to the plan required at this stage.

Trading Plan:
HOLD SDA with a STOP at $21.80

[AussieTrader]

Update:

SDA had all the right conditions set up for continuation on Friday following the previously discussed bullish continuation, but unfortunately that scenario didn't play out, although the overall market got a nice bounce, the sector SDA is in Consumer – Non Cyclical was not a participant in that action. When an overall sector is weak it makes bullish activity from stocks in that sector less likely.

Technically SDA has very quickly put a re-test in of 50MA (weighted) and the descending resistance (now support) line it broke from on Friday. Even though it was a rough give back of 3.97%, it hasn't created a lower low (relative to the recent support test) so we will remain with the same trading plan.

Trading Plan:
HOLD SDA with a STOP at $21.80

[AussieTrader]

Update:

SDA is consolidating above the ascending support zone in normal technical activity.

There is nothing new to add from a fundamental perspective. The trading plan remains unchanged.

Trading Plan:
HOLD SDA with a STOP at $21.80

[AussieTrader]

Update:

Technically SDA continues to respect ascending support. It is struggling to breakout above $24.40, but remaining solidly supported above $23.

Some news released relative to SDA's credit rating being increased by Standard and Poors to BB+, with positive commentary regarding margins, growth and management. Link is attached below:

http://www.tradingmarkets.com/.site/news/Stock%20News/1700845/

Trading plan remains the same.

Trading Plan:

HOLD SDA with a STOP at $21.80

[AussieTrader]

Update:

Technically SDA 'danced' outside that $23 support and closed just above the exponential 50 day moving average, which I anticipate holding. If it does not hold, then we have our stop placed just underneath the recent swing low and the previous 50EMA touch.

There is nothing to add from a fundamental development point of view, so we will maintain the same trading plan.

Trading Plan:

HOLD SDA with a STOP at $21.80

[AussieTrader]

Update:

SDA gave us another down day. We now have 7 consecutive trading days when the stock has closed below it's open price, but only lost around 6% overall in that same time. A slow spiral of death!!!!!

Well hopefully not; SDA is sitting just on / below the important 50EMA and also just above the swing low of June 10th. From this point our stop is in the firing line set just below this crucial area of support. This is a money management stop at a key level. It is now in the hands of Mr Market.

Fundamentally SDA got a 'Reiterated Buy' rating from Citigroup Global Markets. They cited strong momentum domestic and international combined with the ability to price increase to customers and maintain margins. THey also gave a 30% increase to their target price for the stock (the Brazillian listed equivalent stock in local currency).  This is all great, but when the news hit the wires the SDA price upgrade and buy rating were lost behind the downgrade headline for a peer company Perdigao.

The trading plan remains the same, we can only hope for support to hold here and reversal to be put in.

The trading plan remains the same.

Trading Plan:

HOLD SDA with a STOP at $21.80

[AussieTrader]

WE ARE STOPPED OUT OF SDA at $21.80