Walgreen (WAG) In Tight Support/Resistance Range With Bullish Technicals

Posted: Wednesday, November 11, 2009 8:58 AM EDT

Walgreen (NYSE: WAG) closed yesterday at $39.60. So far the stock has hit a 52-week low of $21.39 and 52-week high of $40.69. Walgreen stock has been showing support around 38.96 and resistance in the 40.32 range. Technical indicators for the stock are Bullish and S&P gives WAG a neutral 3 STAR (out of 5) hold rating. WAG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 39 covered call (WAJ AM) for a net debit in the $37.50 area. That is also the break even stock price for this trade. This covered call has a 66 day duration, provides 5.30% downside protection and a 4.00% assigned return rate for a 22.12% 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 WAG Jan '11 22.50 Call (OOB AX) and selling the Jan '10 39 call (WAJ AM) for a $15.25 debit. The trade has a 66 day life and would provide 4.67% downside protection and an 8.20% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Walgreen has a current annual dividend yield of 1.37%. [WBA-Seven Summits Research]

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