Hershey (HSY) Showing Bearish Technicals With Neutral 3 STARs S&P Rating

Posted: Monday, November 23, 2009 8:56 AM EDT

Hershey (NYSE: HSY) closed yesterday at $37.18. So far the stock has hit a 52-week low of $30.27 and 52-week high of $42.25. Hershey stock has been showing support around 36.70 and resistance in the 37.82 range. Technical indicators for the stock are Bearish and S&P gives HSY a neutral 3 STAR (out of 5) hold rating. HSY appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 35 covered call (HSY EG) for a net debit in the $33.78 area. That is also the break even stock price for this trade. This covered call has an 180 day duration, provides 9.14% downside protection and a 3.61% assigned return rate for a 7.32% 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 HSY Jan '11 25 Call (ZKL AE) and selling the May '10 35 call (HSY EG) for an $8.80 debit. The trade has an 180 day life and would provide 9.09% downside protection and a 13.64% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Hershey has a current annual dividend yield of 3.16%. [ABR-Seven Summits Research]

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