Devon Energy (DVN) Trading With Bullish Technicals And Positive 4 STARs S&P Rating

Posted: Thursday, November 19, 2009 8:52 AM EDT

Devon Energy (NYSE: DVN) closed yesterday at $71.66. So far the stock has hit a 52-week low of $38.55 and 52-week high of $75.30. Devon Energy stock has been showing support around 69.75 and resistance in the 72.67 range. Technical indicators for the stock are Bullish and S&P gives DVN a positive 4 STAR (out of 5) buy rating. DVN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 70 covered call (DVN AN) for a net debit in the $66.96 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 6.56% downside protection and a 4.54% assigned return rate for a 28.57% 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 DVN Jan '11 35 Call (VVH AG) and selling the Jan '10 70 call (DVN AN) for a $32.35 debit. The trade has a 58 day life and would provide 6.01% downside protection and an 8.19% assigned return rate for a 52.00% annualized return rate (for comparison purposes only). Devon Energy has a current annual dividend yield of 0.90%. [THA-Seven Summits Research]

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