Forest Laboratories (FRX) 9/8/09 PriceWatch Alert Shows Bullish Technicals

Posted: Tuesday, September 08, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

Forest Laboratories (NYSE: FRX) ended the last trading session at $28.66. So far the stock has hit a 52-week low of $18.37 and 52-week high of $30.64. Forest Laboratories stock has been showing support around 28.04 and resistance in the 29.02 range. Technical indicators for the stock are Bullish and S&P gives FRX a neutral 3 STAR (out of 5) hold rating. FRX appears on the Investors Observer Stocks In The News list. Needham downgraded FRX on Wednesday to Hold from Buy. For a hedged play on this stock, look at a Nov '09 27.50 covered call (FRX KY) for a net debit in the $26.31 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 8.20% downside protection and a 4.52% assigned return rate for a 22.31% 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 FRX Jan '11 15 Call (VFB AC) and selling the Nov '09 27.50 call (FRX KY) for an $11.85 debit. The trade has a 74 day life and would provide 6.32% downside protection and a 5.49% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Forest Laboratories does not pay dividends at this time. [ATU-Seven Summits Research] For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo