Novellus Systems (NVLS) 11/5/09 PriceWatch Alert With $16.51 Break Even

Posted: Thursday, November 05, 2009 8:05 AM EDT
By: Market Intelligence Center Staff

Novellus Systems (NasdaqNM: NVLS) closed yesterday at $19.81. So far the stock has hit a 52-week low of $10.26 and 52-week high of $23.17. Novellus Systems stock has been showing support around 19.41 and resistance in the 20.47 range. Technical indicators for the stock are Bearish and S&P gives NVLS a positive 4 STAR (out of 5) buy rating. NVLS appears on the Investors Observer Stocks In The News list. Morgan Stanley downgraded NVLS Tuesday to Underweight from Equal Weight. For a hedged play on this stock, look at a Mar '10 17.50 covered call (NLQ CW) for a net debit in the $16.51 area. That is also the break even stock price for this trade. This covered call has a 135 day duration, provides 16.66% downside protection and a 6.00% assigned return rate for a 16.21% 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 NVLS Jan '11 5 Call (OTN AA) and selling the Mar '10 17.50 call (NLQ CW) for a $12.00 debit. The trade has a 135 day life and would provide 14.18% downside protection and a 4.17% assigned return rate for an 11.00% annualized return rate (for comparison purposes only). Novellus Systems does not pay dividends at this time. [THA-Seven Summits Research]