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Halftime Report: Key Technical Level To Monitor As Stocks Drift

Stocks drifted lower on Tuesday despite upbeat earnings from Apple as well as a number of Dow components including Caterpillar , which completely blew away expectations.

Instead, investors seemed more focused on two economic items 1) disappointing housing data, which showed construction of new homes rose less than expected and 2) producer prices which posted an unexpected decline, largely on falling energy prices.

What should you be watching?

I’m watching the Dow , reveals Greg Troccoli of Opalesque. On the upside I don’t see much resistance between 10,000 and 10,300. However if we should start to slide -- 9918 is key – if we close below that level we’re in a bull trap.

It feels to me like when the S&P opened around 1098 we were at a key level, muses Jon Najarian. And I expect sellers to l take the S&P even lower but then it should bounce.

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STORY OF THE DAY: APPLE

Brokerages lifted their price targets on Apple Tuesday, with UBS raising estimates to $280, after the firm’s quarterly results trounced Wall Street forecasts.

Apple on Monday said sales of Mac computers -- the largest single contributor to Apple's revenue -- jumped a better-than-foreseen 17 percent in the quarter ended Sept. 26, even as shipments of the closely watched iPhone were held back by problems in producing enough to meet demand, particularly abroad.

Morgan Stanley analyst Kathryn Huberty believes the market is underestimating the earnings power of the iPhone. "We view the combination of new product launches, broader distribution and more attractive pricing as demand drivers over the next two years," Huberty says.

Meanwhille analysts at UBS believe the iPhone will continue to see greater "recurring" iPhone hardware revenue, which should drive more visibility into iPhone sales, as well as iPhone expansion driven by new partnerships.

Separately, J.P.Morgan Securities' analyst Mark Moskowitz said he expects increasing revenue growth out of Apple in the first quarter of 2010, driven by sustained momentum in Mac and iPhone.

The table below lists the price target changes:

New Old
UBS 280 265
RBC 275 250
Caris 260 235
Deutsche 250 225
Canaccord Adams 250 200
Barclays 235 208
Oppenheimer 235 210
Morgan Stanley 230 210
Susquehanna 221 210
JP Morgan 220 210

What’s the trade?

I raised my price target as well, reveals Patty Edwards at Storehouse. I like the stock for the long-term though I’m not sure I’d establish a position at current levels.

Apple is growing revenues and units at a time when much of the world is shrinking, reminds Zach Karabell. That’s a reason to be a buyer.

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TAKE YOUR POSITION: YAHOO

Yahoo reports earnings today after the bell. If Internet analysts are right, this will be the fourth consecutive quarter in which Yahoo's net revenue fell below the preceding quarter.

Analysts polled by Thomson Reuters, on average, predicted that Yahoo will earn 7 cents per share on revenue of $1.12 billion after subtracting commissions paid to advertising partners.

What’s the trade?

At current levels I’m not that excited about Yahoo, says Jon Najarian. I’d buy in – however – if it slid lower.

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TAKE YOUR POSITION: MORGAN STANLEY

Investors are keeping a close eye on the financials with both Morgan Stanley and Wells Fargo scheduled to reports earnings on Wednesday.

Analysts believe Morgan Stanley likely broke a string of three straight losses in the third quarter, while Wells is expected to follow its big bank peers in reporting more loan losses, but how much more is the big question.

What’s the trade?

I’m not a big fan of any bank that took TARP money, says Zach Karabell. I’m concerned about the bonus issue creating a real headwind.

Also regional banks could sink the sector, so I wouldn’t get into financials either, adds Patty Edwards.

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TRADING THE GLOBE: BRAZIL

Brazil's stock market headed for its worst one-day plunge in three months and the national currency sank on Tuesday after the government imposed a tax on foreign investments in local stocks and bonds.

Finance Minister Guido Mantega said on Monday the government would charge a 2 percent financial transactions tax on foreign investments in Brazilian stocks and fixed-income securities in a bid to prevent the country's currency from strengthening further. The tax took effect on Tuesday.

What’s the trade?

Hot money plunged into Brazil after they won the Olympics, explains Zach Karabell. They said, Olympics, raw materials I’m just going to plunge in there. That’s a recipe for momentum bubbles. But as the bubble deflates and the hot money goes elsewhere I’m a buyer of individual companies that looks like a good value.

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TRADE TO GO: URANIUM PLAY

Jon Najarian suggests putting Cameco on your radar.

Unusual options action suggests to Najarian that the stock could make a sharp move higher.

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CALL THE CLOSE

Jon Najarian: I’d be a seller ahead of bank earnings on Wednesday.
Greg Troccoli: I’m a seller
Patricia Edwards: I’m on the sidelines
Zach Karabell: I’d build positions on any dip.


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Trader disclosure: On Oct. 20th, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman's Firm Owns (BAC) Preferred, (BAC) Call Spreads, (BAC); Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (BKS) Puts, Is Short (BKS); Finerman's Firm Owns (MSFT); Finerman's Firm Owns (TGT); Finerman's Firm Owns (UNH) Calls; Finerman's Firm And Finerman Own (WFC) Preferred; Finerrman's Firm And Finerman Own (WMT); Finerman's Firm Is Short (UNG), (IJR), (MDY), (SPY), (IWM), (USO); Finerman Owns (AAPL); Najarian Owns (BX) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (LAZ), Is Short (LAZ) Call, Owns (LAZ) Puts; Najarian Owns (MGM) Calls; Najarian Owns (STX) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (YHOO), Is Short (YHOO) Calls; Najarian Owns (TEX) Call Spread; Finerman's Firm And Finerman Own (FLS); Finerman's Firm Owns (DRI); Seygem Asset Managemnet Is Short (PBR); Seygem Asset Management Is Short (EWZ); Seymour Owns (CHL), (EWZ), (AAPL), (BAC), (CAT), (MGM)

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