Canadian National Railway (CNI) 11/20/09 PriceWatch Alert Support At Around $52.75

Posted: Friday, November 20, 2009 8:46 AM EDT
By: Market Intelligence Center Staff

Canadian National Railway (NYSE: CNI) closed yesterday at $54.07. So far the stock has hit a 52-week low of $29.39 and 52-week high of $55.30. Canadian National Railway stock has been showing support around 52.75 and resistance in the 55.31 range. Technical indicators for the stock are Bullish and S&P gives CNI a positive 4 STAR (out of 5) buy rating. CNI appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 55 covered call (CNI AK) for a net debit in the $52.22 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 3.42% downside protection and a 5.32% assigned return rate for a 34.09% 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 CNI Jan '11 40 Call (XCK AH) and selling the Jan '10 55 call (CNI AK) for a $13.90 debit. The trade has a 57 day life and would provide 0.31% downside protection and a 7.91% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Canadian National Railway has a current annual dividend yield of 1.68%. [FBB-Seven Summits Research]