Applied Materials (AMAT) 11/6/09 PriceWatch Alert Shows Bearish Technicals

Posted: Friday, November 06, 2009 8:31 AM EDT
By: Market Intelligence Center Staff

Applied Materials (NasdaqNM: AMAT) closed yesterday at $12.40. So far the stock has hit a 52-week low of $7.80 and 52-week high of $14.19. Applied Materials stock has been showing support around 11.97 and resistance in the 12.65 range. Technical indicators for the stock are Bearish and S&P gives AMAT a very positive 5 STAR (out of 5) strong buy rating. AMAT appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 12 covered call (ANQ DN) for a net debit in the $10.95 area. That is also the break even stock price for this trade. This covered call has a 162 day duration, provides 11.69% downside protection and a 9.59% assigned return rate for a 21.60% 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 AMAT Jan '11 7.50 Call (VPJ AU) and selling the Apr '10 12 call (ANQ DN) for a $3.75 debit. The trade has a 162 day life and would provide 9.27% downside protection and a 20.00% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Applied Materials has a current annual dividend yield of 2.02%. [FBB-Seven Summits Research]