Target (TGT) 11/20/09 PriceWatch Alert Shows Bearish Technicals

Posted: Friday, November 20, 2009 8:03 AM EDT

Target (NYSE: TGT) closed yesterday at $47.90. So far the stock has hit a 52-week low of $25.00 and 52-week high of $51.77. Target stock has been showing support around 47.19 and resistance in the 48.49 range. Technical indicators for the stock are Bearish and S&P gives TGT a neutral 3 STAR (out of 5) hold rating. TGT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 50 covered call (TJB AJ) for a net debit in the $46.63 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 2.65% downside protection and a 7.23% assigned return rate for a 46.28% 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 TGT Jan '11 27.50 Call (VDH AY) and selling the Jan '10 50 call (TJB AJ) for a $20.03 debit. The trade has a 57 day life and would provide 0.77% downside protection and a 12.33% assigned return rate for a 79.00% annualized return rate (for comparison purposes only). Target has a current annual dividend yield of 1.39%. [FBB-Seven Summits Research]

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