Amgen (AMGN) Trading In Wide Support/Resistance Range

Posted: Tuesday, October 27, 2009 9:09 AM EDT

Amgen (NasdaqNM: AMGN) closed yesterday at $54.33. So far the stock has hit a 52-week low of $44.96 and 52-week high of $64.76. Amgen stock has been showing support around 52.46 and resistance in the 57.56 range. Technical indicators for the stock are Bearish and S&P gives AMGN a positive 4 STAR (out of 5) buy rating. AMGN appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 55 covered call (YAA LK) for a net debit in the $52.22 area. That is also the break even stock price for this trade. This covered call has a 53 day duration, provides 3.88% downside protection and a 5.32% assigned return rate for a 36.66% 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 AMGN Jan '11 20 Call (VAM AZ) and selling the Dec '09 55 call (YAA LK) for a $32.49 debit. The trade has a 53 day life and would provide 3.39% downside protection and a 7.73% assigned return rate for a 53.00% annualized return rate (for comparison purposes only). Amgen does not pay dividends at this time. [ATU-Seven Summits Research]

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