China Mobile (CHL) could break through $49.34 resistance level

China Mobile Ltd (NYSE: CHL) closed Thursday’s trading session at $49.12. In the past year, the stock has hit a 52-week low of $44.36 and 52-week high of $54.70. China Mobile stock has been showing support around $48.90 and resistance in the $49.34 range. Technical indicators for the stock are Bearish and S&P gives CHL a neutral 3 STARS (out of 5) hold rating. For a hedged play on this stock, look at the Mar ’11 $47.50 covered call for a net debit in the $46.27 area. That is also the break-even stock price for this trade. This covered call has a duration of 92 days, provides 5.80% downside protection and an assigned return rate of 2.66% for an annualized return rate of 10.55% (for 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 CHL Jan ’12 $40.00 call and selling the Mar ’11 $47.50 call for a total debit of $7.00. The trade has a lifespan of 92 days and would provide 4.32% downside protection and an assigned return rate of 7.14% for an annualized return rate of 28% (for comparison purposes only). China Mobile has a current annual dividend yield of 3.34%.
Article via  marketintelligencecenter