5 Earnings Season Stocks That Could Surprise Investors Walgreen (WAG) Showing Bullish Technicals With Resistance At $41.88 Posted: Friday, January 28, 2011 8:58 AM EDT
Walgreen Co (NYSE: WAG) closed Thursday's trading session at $41.07. In the past year, the stock has hit a 52-week low of $26.26 and 52-week high of $42.20. Walgreen stock has been showing support around $40.28 and resistance in the $41.88 range. Technical indicators for the stock are Bullish and S&P gives WAG a positive 4 STARS (out of 5) buy rating. For a hedged play on this stock, look at the Mar '11 $41.00 covered call for a net debit in the $39.86 area. That is also the break-even stock price for this trade. This covered call has a duration of 50 days, provides 2.95% downside protection and an assigned return rate of 2.86% for an annualized return rate of 20.88% (for comparison purposes only). A lower-cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the WAG Jan '12 $25.00 call and selling the Mar '11 $41.00 call for a total debit of $15.04. The trade has a lifespan of 50 days and would provide 2.51% downside protection and an assigned return rate of 6.38% for an annualized return rate of 47% (for comparison purposes only). Walgreen has a current annual dividend yield of 1.70%. [THA-Seven Summits Research]
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