Cardinal Health (CAH) 11/20/09 PriceWatch Alert Technicals Showing Bullish

Posted: Friday, November 20, 2009 8:31 AM EDT
By: Market Intelligence Center Staff

Cardinal Health (NYSE: CAH) closed yesterday at $31.59. So far the stock has hit a 52-week low of $24.87 and 52-week high of $39.87. Cardinal Health stock has been showing support around 31.02 and resistance in the 32.06 range. Technical indicators for the stock are Bullish and S&P gives CAH a neutral 3 STAR (out of 5) hold rating. CAH appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Mar '10 30 covered call (CAH CF) for a net debit in the $28.84 area. That is also the break even stock price for this trade. This covered call has a 120 day duration, provides 8.71% downside protection and a 4.02% assigned return rate for a 12.23% 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 CAH Jan '11 20 Call (OCJ AD) and selling the Mar '10 30 call (CAH CF) for a $9.50 debit. The trade has a 120 day life and would provide 6.62% downside protection and a 5.26% assigned return rate for a 16.00% annualized return rate (for comparison purposes only). Cardinal Health has a current annual dividend yield of 2.22%. [FBB-Seven Summits Research]