Colgate Palmolive (CL) 10/30/09 PriceWatch Alert With Support Around $74.76

Posted: Friday, October 30, 2009 8:08 AM EDT
By: Market Intelligence Center Staff

Colgate Palmolive (NYSE: CL) closed yesterday at $78.94. So far the stock has hit a 52-week low of $54.51 and 52-week high of $80.41. Colgate Palmolive stock has been showing support around 74.76 and resistance in the 81.56 range. Technical indicators for the stock are Bullish and S&P gives CL a very positive 5 STAR (out of 5) strong buy rating. CL appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Dec '09 80 covered call (CL LP) for a net debit in the $77.14 area. That is also the break even stock price for this trade. This covered call has a 50 day duration, provides 2.28% downside protection and a 3.71% assigned return rate for a 27.07% 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 CL Jan '11 55 Call (VGO AK) and selling the Dec '09 80 call (CL LP) for a $22.75 debit. The trade has a 50 day life and would provide 1.51% downside protection and a 9.89% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). Colgate Palmolive has a current annual dividend yield of 2.26%. [FBB-Seven Summits Research]