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No.1 - Quarter End Trade

Friday, 30 Mar 2007 | 5:09 PM ET

What's Working as Subprime Rash Sends Dow Towards First Losing Quarter in Nearly 2 Years?

Friday, March 30 is the final day of trading before money managers must close the books on a tumultuous first quarter - billions of dollars will exchange hands. A sub-prime slime blew the doors off housing and taxed financial stocks, while the nuts and bolts of the American economy -- tire & steel -- surprisingly forged along. With a confused Fed Chief and surging oil prices, what trends await us for the rest of of 2007?

Straight from one of the most active trading floors in the world, Mike McCarty, Head of Program Trading at Morgan Stanley (MS) joins the guys for this conversation.

McCarty says the sector where he’s seeing the most activity is energy – with volume exploding in the past couple days. He expects the same for Friday.

Dylan asks why an explosion in volume matters.

McCarty compares a surge in volume to a report card – and adds volume usually continues to carry on into the next quarter.

Guy Adami agrees, saying traders will pile on select energy stocks tomorrow and the trading will perpetuate itself into the next week, sending shares higher.

In the energy space Eric Bolling likes Western Refining (WNR)which he calls a great company

Dylan asks McCarty about the financial services sector and how it compares to the energy sector.

In the next quarter, McCarty says he anticipates that energy will be up and financials down.

Dylan asks Tim Strazzini if that means investors should go long energy and short financials.

Tim Strazzini thinks investors should trade against the trend. Although he agrees with Mr. McCarty’s analysis, Tim recommends buying financials at a strategic point in the future, perhaps in a week or two.

Jeff Macke agrees, saying if traders puke financials on Friday, investors should think about which stocks might be a good long term buy.

McCarty reminds that on the last day of a quarter, there’s typically a 25% spike in volume and that will provide an opportunity for traders to get in or out of any stock of their choosing.

Questions? Comments? fastmoney@cnbc.com

Trader disclosure:
On MAR 29,, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Macke Owns (SWY), Strazzini Owns (MO), (NBG), (SNDK), (STM) Bolling Owns (NMX), (ICE), Gold, Silver, Is Short Natural Gas

The Top Three #1
End of quarter trading
  Price   Change %Change
WNR
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MS
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