Dreamworks Animation (DWA) PriceWatch Alert Shows Bullish Technicals

Posted: Friday, June 05, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Dreamworks Animation (NasdaqNM: DWA) closed yesterday at $28.90. So far the stock has hit a 52-week low of $17.32 and 52-week high of $32.73. Dreamworks Animation stock has been showing support around 28.50 and resistance in the 29.30 range. Technical indicators for the stock are Bullish and S&P gives DWA a positive 4 STAR (out of 5) buy rating. DWA appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 25 covered call (YXS AE) for a net debit in the $23.10 area. That is also the break even stock price for this trade. This covered call has a 225 day duration, provides 20.07% downside protection and an 8.23% assigned return rate for a 13.34% 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 DWA Jan '10 20 Call (YXS AD) and selling the Jan '10 25 call (YXS AE) for a $4.10 debit. The trade has a 225 day life and would provide 16.61% downside protection and a 21.95% assigned return rate for a 36.00% annualized return rate (for comparison purposes only). Dreamworks Animation 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]