Adobe Systems (ADBE) 11/3/09 PriceWatch Alert Shows Bearish Technicals

Posted: Tuesday, November 03, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

Adobe Systems (NasdaqNM: ADBE) closed yesterday at $32.87. So far the stock has hit a 52-week low of $15.70 and 52-week high of $35.95. Adobe Systems stock has been showing support around 32.05 and resistance in the 33.51 range. Technical indicators for the stock are Bearish and S&P gives ADBE a neutral 3 STAR (out of 5) hold rating. ADBE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 32.50 covered call (ABJ AZ) for a net debit in the $30.57 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 7.00% downside protection and a 6.31% assigned return rate for a 31.14% 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 ADBE Jan '11 15 Call (VAE AC) and selling the Jan '10 32.50 call (ABJ AZ) for a $15.90 debit. The trade has a 74 day life and would provide 5.99% downside protection and a 10.06% assigned return rate for a 50.00% annualized return rate (for comparison purposes only). Adobe Systems does not pay dividends at this time. [ATU-Seven Summits Research]