Watson Pharmaceutical (WPI) Showing Bullish Technicals With Support At $51.41

Watson Pharmaceutical (NYSE:WPI) closed Wednesday's negative trading session at $52.44. In the past year, the stock has hit a 52-week low of $37.26 and 52-week high of $53.75. Watson Pharmaceutical stock has been showing support around $51.41 and resistance in the $53.95 range. Technical indicators for the stock are Bullish and S&P gives WPI a positive 4 STARS (out of 5) buy rating. For a hedged play on this stock, look at the May '11 $50.00 covered call for a net debit in the $48.14 area. That is also the break-even stock price for this trade. This covered call has a duration of 121 days, provides 8.20% downside protection and an assigned return rate of 3.86% for an annualized return rate of 11.66% (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 WPI Jan '12 $35.00 call and selling the May '11 $50.00 call for a total debit of $13.65. The trade has a lifespan of 121 days and would provide 7.23% downside protection and an assigned return rate of 9.89% for an annualized return rate of 30% (for comparison purposes only). Watson Pharmaceutical does not pay dividends at this time.