Petroleo Brasileiro (PBR) 11/6/09 PriceWatch Alert Support Down To $47.19

Posted: Friday, November 06, 2009 8:32 AM EDT

Petroleo Brasileiro (NYSE: PBR) closed yesterday at $49.26. So far the stock has hit a 52-week low of $14.73 and 52-week high of $51.67. Petroleo Brasileiro stock has been showing support around 47.19 and resistance in the 50.33 range. Technical indicators for the stock are Bullish and S&P gives PBR a neutral 3 STAR (out of 5) hold rating. PBR appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 50 covered call (PMJ AJ) for a net debit in the $46.01 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 6.60% downside protection and an 8.67% assigned return rate for a 44.58% 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 PBR Jan '11 25 Call (VDW AE) and selling the Jan '10 50 call (PMJ AJ) for a $21.10 debit. The trade has a 71 day life and would provide 6.41% downside protection and an 18.48% assigned return rate for a 95.00% annualized return rate (for comparison purposes only). Petroleo Brasileiro has a current annual dividend yield of 0.75%. [FBB-Seven Summits Research]

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