Carnival (CCL) Down 1.6% In Premarket But Showing Bullish Technicals

Posted: Tuesday, November 10, 2009 9:08 AM EDT

Carnival (NYSE: CCL) closed yesterday at $31.92. So far the stock has hit a 52-week low of $14.85 and 52-week high of $34.95. Carnival stock has been showing support around 30.48 and resistance in the 32.64 range. Technical indicators for the stock are Bullish and S&P gives CCL a neutral 3 STAR (out of 5) hold rating. CCL appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 31 covered call (CCL AJ) for a net debit in the $29.32 area. That is also the break even stock price for this trade. This covered call has a 67 day duration, provides 8.15% downside protection and a 5.73% assigned return rate for a 31.22% 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 CCL Jan '11 12.50 Call (VKR AV) and selling the Jan '10 31 call (CCL AJ) for a $16.85 debit. The trade has a 67 day life and would provide 8.05% downside protection and a 9.79% assigned return rate for a 53.00% annualized return rate (for comparison purposes only). Carnival does not pay dividends at this time. [ATU-Seven Summits Research]

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