Novartis AG (NVS) In Tight Support/Resistance Range

Posted: Tuesday, February 09, 2010 8:20 AM EDT
By: Market Intelligence Center Staff

Novartis AG (NYSE: NVS) closed yesterday at $53.08. So far the stock has hit a 52-week low of $33.34 and 52-week high of $56.42. Novartis AG stock has been showing support around 52.62 and resistance in the 53.68 range. Technical indicators for the stock are Bearish and S&P gives NVS a positive 4 STAR (out of 5) buy rating. NVS appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '11 50 covered call for a net debit in the $48.38 area. That is also the break even stock price for this trade. This covered call has a 347 day duration, provides 8.85% downside protection and a 3.35% assigned return rate for a 3.52% 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 NVS Jan '11 45 Call and selling the Jan '11 50 call for a $3.95 debit. The trade has a 347 day life and would provide 7.78% downside protection and a 26.58% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Novartis AG has a current annual dividend yield of 2.69%. [ATU-Seven Summits Research]