Hewlett Packard (HPQ) PriceWatch Alert Technicals Showing Bearish

Posted on Wednesday, July 23, 2008 8:07 AM

Hewlett Packard (NYSE: HPQ) closed yesterday at $43.53. So far the stock has hit a 52-week low of $39.99 and 52-week high of $53.48. Hewlett Packard stock has been showing support around 42.31 and resistance in the 44.17 range. Technical indicators for the stock are Bearish and S&P gives HPQ a very positive 5 STAR (out of 5) strong buy rating. HPQ appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Sep '08 45 covered call (HPQ II) for a net debit in the $42.18 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 3.10% downside protection and a 6.69% assigned return rate for a 41.36% 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 HPQ Jan '09 30 Call (HPQ AF) and selling the Sep '08 45 call (HPQ II) for a $12.75 debit. The trade has a 59 day life and would provide 1.79% downside protection and a 17.65% assigned return rate for a 109.00% annualized return rate (for comparison purposes only). Hewlett Packard does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]