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Network Appliance (NTAP) Trading Just Under Resistance With Bearish Technicals

Posted: Monday, February 01, 2010 8:18 AM EDT

Network Appliance (NASDAQ: NTAP) closed yesterday at $29.13. So far the stock has hit a 52-week low of $12.39 and 52-week high of $34.99. Network Appliance stock has been showing support around 28.08 and resistance in the 30.80 range. Technical indicators for the stock are Bearish and S&P gives NTAP a neutral 3 STAR (out of 5) hold rating. NTAP appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 29 covered call for a net debit in the $26.33 area. That is also the break even stock price for this trade. This covered call has a 138 day duration, provides 9.61% downside protection and a 10.14% assigned return rate for a 26.82% annualized return rate (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 NTAP Jan '11 17.50 Call and selling the Jun '10 29 call for a $9.65 debit. The trade has a 138 day life and would provide 6.80% downside protection and a 19.17% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Network Appliance does not pay dividends at this time. [ABR-Seven Summits Research]

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