Western Digital (WDC) PriceWatch Alert Shows Bearish Technicals

Posted on Monday, September 08, 2008 8:07 AM

Western Digital (NYSE: WDC) ended the last trading session at $25.77. So far the stock has hit a 52-week low of $21.91 and 52-week high of $40.00. Western Digital stock has been showing support around 24.62 and resistance in the 26.52 range. Technical indicators for the stock are Bearish and S&P gives WDC a neutral 3 STAR (out of 5) hold rating. WDC appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '09 20 covered call (WDC DD) for a net debit in the $18.47 area. That is also the break even stock price for this trade. This covered call has a 222 day duration, provides 28.33% downside protection and an 8.28% assigned return rate for a 13.62% 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 WDC Jan '10 10 Call (YYH AB) and selling the Apr '09 20 call (WDC DD) for a $9.40 debit. The trade has a 222 day life and would provide 24.72% downside protection and a 6.38% assigned return rate for a 10.00% annualized return rate (for comparison purposes only). Western Digital 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]