GlaxoSmithKline PLC (GSK) 10/23/09 PriceWatch Alert Technicals Showing Bullish

Posted: Friday, October 23, 2009 8:34 AM EDT
By: Market Intelligence Center Staff

GlaxoSmithKline PLC (NYSE: GSK) closed yesterday at $41.54. So far the stock has hit a 52-week low of $27.15 and 52-week high of $42.18. GlaxoSmithKline PLC stock has been showing support around 41.05 and resistance in the 41.87 range. Technical indicators for the stock are Bullish and S&P gives GSK a neutral 3 STAR (out of 5) hold rating. GSK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Feb '10 40 covered call (GSK BH) for a net debit in the $38.74 area. That is also the break even stock price for this trade. This covered call has a 120 day duration, provides 6.74% downside protection and a 3.25% assigned return rate for a 9.89% 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 GSK Jan '11 30 Call (VLX AF) and selling the Feb '10 40 call (GSK BH) for a $9.15 debit. The trade has a 120 day life and would provide 5.75% downside protection and a 9.29% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). GlaxoSmithKline PLC has a current annual dividend yield of 4.42%. [FBB-Seven Summits Research]