Safeway (SWY) 11/11/09 PriceWatch Alert Shows Bullish Technicals

Posted: Wednesday, November 11, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

Safeway (NYSE: SWY) closed yesterday at $23.22. So far the stock has hit a 52-week low of $17.19 and 52-week high of $24.32. Safeway stock has been showing support around 22.92 and resistance in the 23.62 range. Technical indicators for the stock are Bullish and S&P gives SWY a weak 2 STAR (out of 5) sell rating. SWY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Mar '10 22.50 covered call (SWY CX) for a net debit in the $21.27 area. That is also the break even stock price for this trade. This covered call has a 129 day duration, provides 8.40% downside protection and a 5.78% assigned return rate for a 16.36% 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 SWY Jan '11 15 Call (VYW AC) and selling the Mar '10 22.50 call (SWY CX) for a $6.80 debit. The trade has a 129 day life and would provide 6.12% downside protection and a 10.29% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Safeway has a current annual dividend yield of 1.72%. [WBA-Seven Summits Research]