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HALFTIME REPORT: How to Trade Senator Dodd's Financial Reforms

With the Dow moving between positive and negative territory, dancing around its 13-month high in Tuesday's intraday trading, Senator Chris Dodd's speech on credit agencies and government regulation dominated chatter in the market. Wall Street has also seen tech companies performing well in the morning's trading, while commodity stocks have been weighing on the market.

But how can you make money on these moves? The Fast Money traders have some profitable plays for your portfolio.

Word on the Street

With new information from Senator Chris Dodd on proposed financial reforms, these new announcements have had profound impact on the credit ratings agencies. If the bill Dodd explained is realized, which also included provisions for a new SEC office dedicated to oversight of credit ratings, it would make it significantly easier for companies to sue the credit rating agencies for their bad ratings.

Pete Najarian is a little hesitant to trade on this bill as-is, pointing out that in its 1,100 pages, there will likely be changes to the proposed legislation. Because of this, Najarian sees a possible buying opportunity here, as people may be overreacting to bad news for these companies.

How should you play it? JJ Kinahan of TD Ameritrade suggests the strategy of selling put options on these names, because volatility is going up and investors who are long these stocks are willing to pay a little more for puts that are slightly out of the money. He brings up trading patterns in Wells Fargo as an example.

But should looming regulatory overhaul scare you away from financials in general? "You've got to be incredibly careful and do your homework," says Patricia Edwards of Storehouse Partners. Her strategy would be to use options wherever her money was going, looking at smaller, 'third-tier" banks specifically.

With the general market on an upward trajectory, the momentum has stalled slightly on Tuesday, where is the market headed and what should investors be looking for? What stage are we at in this advance?

Carter Worth of Oppenheimer thinks the important thing to look for is whether the rate of ascent for stocks is abating. Up since March, he's identified the market as being in a "stall period," prepared for the beginnings of a down trend.

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Big Questions for the Market

With the overall market in a stall pattern, what are the big questions for the different sectors of the market? In the coal space, Pete Najarian is interested in whether China's demand for steel and coal will continue to rise through 2010 and 2011. If the Chinese demand is still there, he sees opportunity in every pullback. He points out the moves in companies like Alpha Natural and Walter Energy who tend to pull back off highs, but continue finding support for subsequent upward moves, establishing higher lows.

With consumer names like Coca-Cola, Procter and Gamble and Clorox showing strength, where can you put your money in this space? Patty Edwards likes these companies because of their overseas exposure, because the big growth potential for these companies remains outside the United States.

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Topping the Tape: Techs Performing Well

With names like Priceline.com and Research In Motion up big in intraday trading, what looks attractive in tech land?

JJ Kinahan thinks the big name in tech right now is Activision, which is releasing its newest "Call of Duty" video game. He sees the stock as a low-priced retail trader buying opportunity, looking forward to reaction from the video game's release.

For Research in Motion, Patty Edwards like the P/E ratio and thinks the future for the company is good, despite releases of new smart phone handsets, because institutional buyers of RIM's phones will not be quick to switch to a new technology.

So what's the trade?

Pete Najarian thinks the best place to be is in the chip names, such as NVIDIA, Intel or Texas Instruments , who support production in these big technology names. Buying on pullbacks is the strategy here, he says.

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Retailers Rolling Over Before Earnings

With a slew of retail earnings on the horizon, where should the money be flowing in this sector? Is there a catalyst out there for these stocks?

Carter Worth sees Walmart and McDonalds as out performers in the space throughout the bear market, but laggards since the March recovery. Worth points out that Walmart has lagged the entire retail space, but specifically all supermarkets during this time. From his analysis, he expects earnings to come in well, looking for a pop from its current price around 52 up to around 55. Right now Walmart is being valued like a supermarket when instead it should also be valued as a retailer, he says.

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Options Action: Rental Cars

Coming out with earnings just a week ago, the car rental companies produced a profit alongside more recent news from Priceline.com that the car rental business has been growing. The Avis Budget Group has seen people rolling out of November options and into December options, with an over 400% increase in buying activity for December calls. Najarian sees this as investors looking for increased upside over the next few weeks.

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CALL THE CLOSE

Pete Najarian:
You gotta buy the market's strength today.
JJ Kinahan: I'm a buyer into the close.
Patty Edwards: Sitting on the sidelines until the future is clearer.
Carter Worth: I'm a seller.


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Trader disclosure: On November 10th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;

Najarian Owns (RIMM) Call Spreads, Najarian Owns (YHOO), (YHOO) Puts, Najarian Owns (INTC), (INTC) Call Spread, Najarian Owns (TXN), Is Short (TXN) Calls, Najarian Owns (JWN) Calls, Najarian Owns (BX) Calls, Najarian Owns (BP) Calls, Najarian Owns (AA) Call Spreads, Najarian Owns (CLF), Is Short (CLF) Calls, Najarian Owns (BTU) Call Spread

Edwards Owns (COST), Edwards Owns (WMT), Edwards Owns (PM), Edwards Owns (GLD) For Clients

JOE TERRANOVA

Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.

Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBC)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)

Terranova Owns (SU)


***TERRANOVA HAS DISCLOSED FOR GOLD, CRUDE OIL, NATURAL GAS, U.S. DOLLAR


CNBC.com with wires

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NVDA
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PCLN
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PG
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BB
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TXN
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WFC
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WLT
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WMT
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MCD
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