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Halftime Report: Trading Homebuilders, Materials & Other Market Movers

Stocks rallied on Thursday after a solid profit report from Alcoa combined with a weaker dollar sent commodities and materials shares soaring.

Also mid-day comments by House Speaker Nancy Pelosi sent homebuilders skyward but dragged down insurance stocks.

Where is the smart money going to work?

Options investors have been snapping up commodities names as well as gold stocks, explains OptionMonster Jon Najarian. I don’t see any let up in out of the money call buying in commodity based stocks.

There’s bullish momentum in this market, adds Fast Money trader Guy Adami. No doubt about it. You can be bearish for all the right reasons and the market will still go higher. But... at some point... someone will wake up and realize the data isn’t as good as it seems.

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PELOSI BOOSTS HOMEBUILDERS

The Homebuildres ETF shot higher on Thursday after House Speaker Nancy Pelosi said Congress will consider extending the tax credit for first-time home buyers, currently set to expire Dec. 1.

What’s the trade?

It seems like Washington is showing us their hand, speculates Jon Najarian. And whenever you have somebody showing you their hand you have to bet on that side. I expect to see a great deal of volatility in the space through November 30th. And as that plays out we’ll likely see opportunities to scalp stocks such as Hovnanian and Toll Brothers and all the rest.

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PELOSI MOVES HEALTH INSURERS

Health insurance companies such as Aetna and UnitedHealth are also making moves on Wednesday – sharp moves lower -- also due to comments made by Nancy Pelosi. The Speaker said Democrats are looking at the possibility of a windfall profits tax on insurance companies as part of healthcare reform.

What’s the trade?

The insurers are the proverbial rented mule, says JJ Kinahan of TD Ameritrade, everybody is just kicking them right now. I wouldn’t play the stock. I’d either buy puts or sell upside call spreads.

In the space I like United Health, says Guy Adami. I'm a buyer now, when it looks the worst, because I think the rhetoric will pass.

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OIL ABOVE $71

Oil rose above $71 a barrel on Thursday largely buoyed by the weaker U.S. dollar.

What’s the trade?

It seems that every time oil drops below $70 it immediately rallies, muses JJ Kinahan. The next key level is $73. Personally, I wouldn’t stand in front of this train.

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GOLD SETS ANOTHER RECORD

Gold set another record on Thursday with the spot price topping $1,050 per ounce. The precious metal has gained about 20 percent this year, driven by dollar weakness and inflation worries after central banks across the globe poured money into the financial system to help stimulate the economy.

What’s the trade?

Patterns in the charts suggest resistance could come around $1080, explains Katie Stockton of MKM. I think we could see that before October 23rd. However if it breaks through it could go to $1185.

If you’re looking to play metals, I’d do it with FreeportMcMoran, counsels Guy Adami. The stock looks like it’s going to break above $75.

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RETAILERS ROCKING TODAY

The XRT climbed on Thursday after retailers posted their first monthly sales increase in more than a year, which suggested to investors that recession-battered consumers might be regaining their ability to spend again.

Based on 30 retailers, sales at stores open at least a year climbed 0.6 percent, compared with expectations for a 1.1 percent decline, according to Thomson Reuters data. Nearly 80 percent of the companies beat expectations.

Among the day’s standouts; Macy's, Abercrombie & Fitch and Kohl's all surprised Wall Street on Thursday with better-than-expected September sales.

What’s the trade?

I’d be a seller of strength in the retail sector, says Katie Stockton. It seems to me that XRT is coming into a zone of resistance in the mid-30’s.

In the space I like Target , adds Jon Najarian. I’d get long.

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NETAPP PUSHES TECH HIGHER

Shares of NTAP surged on Thursday after the company issued upbeat earnings and revenue forecasts for its second and third fiscal quarters.

The guidance follows comments made by chief executive Tom Georgens in a Barron’s interview in which he said that selling the data storage company might make sense at some point in the future.

What’s the trade?

I think this space is very attractive, says Pete Najarian. Along with NTAP I also have Seagate and Western Digital on my radar.

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CALL THE CLOSE

Guy Adami: Ride the wave and get out of the way.

Jon Najarian: The momentum is with buyers.

JJ Kinahan: I’m a buyer.

Katie Stockton: I’m a seller into the bell.


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Trader disclosure: On October 8, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (UNH) Calls; Finerman's Firm Owns (MSFT), (TGT); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm And Finerman Own (WMT); Finerman's Firm Is Short (USO), (IJR), (MDY), (SPY), (IWM), (UNG); Finerman's Firm Owns (BAC), (BAC) Call Spread, (BAC) Preferred; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (AET) Calls; Finerman's Firm Owns (WLP) Calls; Finerman's Firm Owns (RIG), Is Short (RIG) Calls; Finerman Owns (RIG); Pete Najarian Owns (BRCD) Calls; Pete Najarian Owns (C) Calls; Pete Najarian Owns (INTC), Is Short (INTC) Calls; Pete Najarian Owns (MYL) Calls; Pete Najarian Owns (STX) Calls; Pete Najarian Owns (WFC) Puts; Pete Najarian Owns (YHOO) Call Spread; Grasso Owns (AAPL), (ABK), (ASTM), (BAC), (C), (COST), (PRST), (V), (WMT), (FAZ)

For Steve Grasso
Stuart Frankel Corp. & Partners Own (CMCSK)
Stuart Frankel Corp. & Partners Own (CUBA)
Stuart Frankel Corp. & Partners Own (GERN)
Stuart Frankel Corp. & Partners Own (HSPO)
Stuart Frankel Corp. & Partners Own (LMT)
Stuart Frankel Corp. & Partners Own (MSFT)
Stuart Frankel Corp. & Partners Own (NWS.A)
Stuart Frankel Corp. & Partners Own (NXST)
Stuart Frankel Corp. & Partners Own (NYX)
Stuart Frankel Corp. & Partners Own (PDE)
Stuart Frankel Corp. & Partners Own (PRST)
Stuart Frankel Corp. & Partners Own (RDC)
Stuart Frankel Corp. & Partners Own (ROK)
Stuart Frankel Corp. & Partners Own (TBT)
Stuart Frankel Corp. & Partners Own (TLM)
Stuart Frankel Corp. & Partners Own (XOM)
Stuart Frankel Corp. & Partners Own (XRX)
Stuart Frankel Corp. & Partners Own (SDS)
Stuart Frankel Corp. & Partners Are Short (QQQQ)
Stuart Frankel Corp. & Partners Are Short (CL)

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AET
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ANF
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FCX
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HOV
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KSS
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M
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NTAP
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STX
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TGT
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TOL
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UNH
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WDC
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SPDR SP HB
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SPDR SPRET
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