Colgate Palmolive (CL) Showing Bearish Technicals With a 2.86% Dividend Yield

Posted: Wednesday, September 01, 2010 9:09 AM EDT
By: Market Intelligence Center Staff

Colgate Palmolive (NYSE: CL) closed yesterday at $73.84. So far the stock has hit a 52-week low of $70.45 and 52-week high of $87.39. Colgate Palmolive stock has been showing support around 72.99 and resistance in the 75.25 range. Technical indicators for the stock are Bearish and S&P gives CL a positive 4 STAR (out of 5) buy rating. CL appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Nov '10 75 covered call for a net debit in the $71.71 area. That is also the break even stock price for this trade. This covered call has an 80 day duration, provides 2.88% downside protection and a 4.59% assigned return rate for a 20.93% 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 CL Jan '12 50 Call and selling the Nov '10 75 call for a $22.57 debit. The trade has an 80 day life and would provide 1.72% downside protection and a 10.77% assigned return rate for a 49.00% annualized return rate (for comparison purposes only). Colgate Palmolive has a current annual dividend yield of 2.86%. [WBA-Seven Summits Research]