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STREET GANGS UP ON GOLDMAN
The news: On Tuesday Goldman Sachs [GS
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] was downgraded to "hold" from "buy" by Deutsche Bank analyst Mike Mayo, who said the largest U.S. securities firm was not immune to capital market pressures, especially given its exposure to weaker European growth.
Meanwhile, Oppenheimer & Co's influential analyst Meredith Whitney said as Goldman's revenue is more equity-linked than its broker peers, the fact that broad global equity market indices are all down double-digits will have a meaningful effect on the company's earnings.
Also, shares of JPMorgan Chase [JPM
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] tumbled Tuesday after the bank said it has heaped more losses in its mortgage investments so far in the third quarter than it did in the previous three-month period.
The plays: I bought Goldman on the downgrades, reveals Joe Terranova. I don’t think this is financial Armageddon.
Technically Goldman broke the 50-day moving average, says Jeff Macke. I’d buy it at $150.
I’d wait for more of a pull back on Goldman, says Jon Najarian. I like JP Morgan.
I like Morgan Stanley [MS
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], exclaims Pete Najarian. Around $40 I think it’s a buy.
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OIL SLIDE
The news: Oil prices [US@CL.1
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] were falling Tuesday, down as low as $112.31. Demand for crude is being dampened by a stronger U.S. dollar and more evidence that developed countries like the United States are cutting back on their energy use.
The play: I think we could go to $110, says Joe Terranova. Friday is the options expiration for the September contract. The open interest in puts at the $110 strike is above 25,000 and building.
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GOING FOR THE GOLD?
The news: Gold tumbled to its weakest levels in almost eight months in volatile trade on Tuesday, losing its safe-haven appeal as investors shifted some of their money back to the U.S. dollar while oil further retreated from record highs.
The play: I wouldn’t get into gold without protection, says Jon Najarian. Look at an option trade on the GLD, calls if you’re bullish and puts if you’re bearish.
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IN THE ZONE
With gold plunging and the dollar rising we can’t think of anyone better to turn to for advice than strategic investor Dennis Gartman, author of The Gartman Letter. Following is a summary of our conversation with him.
"I think the game has changed for the dollar," Gartman says on Fast Money. "It seems clear that we’ve broken every trend line that might have been in favor of the euro. The psychology has changed dramatically and hedgers will probably have to unwind short dollar positions."
How do you recommend trading?
"I’d be a seller of gold," says Dennis Gartman. "Gold is going down amongst amazingly bullish news. I think any strength in gold should be sold."
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TOPPING THE TAPE: AIRLINES
The news: JP Morgan Securities revised its ratings on most of the major airline stocks, partly due to improved non-fuel fundamentals and bolstered liquidity.
They upgraded AMR Corp [AMR
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], Continental Airlines Inc [CAL
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] and US Airways Group Inc [LCC
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] to "overweight" from "underweight," Delta Air Lines [DAL
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] and Alaska Air [ALK
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] to "overweight" from "neutral," and Northwest Airlines Corp [NWA
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] to "neutral" from "underweight."
And it downgraded Southwest Airlines [LUV
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] to "underweight" from "neutral."
The play: If you’re not already in it I wouldn’t chase it, says Pete Najarian.
I want to see how the airlines hedge their fuel costs before I get into this group, says Jeff Macke.
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OPTIONS ACTION: OFF THE RAILS
The news: Pete Najarian is seeing unusual options action in the rails.
The play: Keep an eye on CSX [CSX
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] and Union Pacific [UNP
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], Najarian counsels. The put buying appears bearish. I think they’re breaking down. As the commodity trade unravels it could take the rails lower.
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Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
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Trader disclosure: On Aug 12, 2008, 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 (MSFT), (WMT), (UUP), (EMC); Pete Najarian Owns (AAPL),(NVDA), (TSO); Pete Najarian Owns (CSCO) Calls; Jon Najarian Owns (C),(NVDA); Jon Najarian Owns (AAPL) Calls,(CSCO) Calls, (TSO) Calls; Jon Najarian Owns (GLD) Puts, Jon Najarian Owns (EEM) Puts; Terranova Owns (GS), (YHOO), (XLF), (INTC), (SU), (VLO), (SA), (BNI), (RIMM), (KOL), (CME), (GOOG), (IYT), (FCX); Terranova Is Short December 2008 Crude Oil; Terranova Is Long December 2012 Crude Oil;
Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BRE), (CNTY), (CLB), (OFC), (DLR), (ESS), (EXR), (FL), (IAT), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (SKT), (BLV)
Gartman Owns (AFFY), (FLO), (IBM), (HOG), (SJT), (SDS); Gartman Is Short (TM)