7 was not a lucky number for the bulls – on Tuesday they were unable to drive the S&P higher, disappointing investors who were hoping for seven consecutive days of gains.
It was largely action in the dollar that derailed stocks. The greenback held firm against a basket of currencies on Tuesday, dragging down energy , materials and other related names.
Does the pullback present a buying opportunity? Should you gobble up commodities on the dip?
Strategy Session with the Fast Money traders
Although US Steel , Potash and Chesapeake are all down, I’m not sure I’d buy these or any commodity stocks on Tuesday's dip, counsels Pete Najarian. However if we see an extended pullback then I’d consider establishing a new position.
I’m watching the action in Freeport McMoRan, adds Jeff Tomasulo of SMB. It’s had a huge run up since March. I’m a buyer of FCX on major pullbacks as a play on copper strength.
If you’re an individual investor interested in playing commodities, it’s important to know there are a lot of big investors playing them instead of bonds, explains Patty Edwards of Storehouse. That could make the space volatile.
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OIL FAILS AGAIN AT $80
Of all the commodities, perhaps none is more closely watched than oil , which briefly rose above $79 a barrel to a fresh five-week high on Tuesday, supported by expectations of colder U.S. weather and concerns over political developments in Iran.
However, $80 remained a level of technical resistance and by afternoon oil had pared gains.
With inventory reports due on Wednesday, can oil break above resistance?
Historically oil does well from Christmas Eve into early January, explains Joe Terranova. If we see a decline in oil inventories of 1.5 million barrels or more and a draw down in distillates, I think we see a spike in the price of oil.
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CALL OF THE DAY: AMAZON
Investors were watching the action in Amazon on Tuesday after two brokerages raised their price targets on the stock.
Piper Jaffray raised its target to $172 from $163 and gave the stock an "overweight" rating, and Kaufman Bros raised its target to $155 from $120. Kaufman rates the stock at "hold."
What’s the trade?
I like their growth but Amazon is trading at 44 times next year’s earnings, explains Patty Edwards. There are so many things coming up against Amazon that I’d wait for a pullback before jumping in.
And if you are establishing a new position in Amazon I’d make sure to buy put protection, counsels Pete Najarian. It’s been quite an elevator ride higher and it could be a perilous ride down.
Elsewhere in retail, I like Home Depot, says JJ Kinahan of TD Ameritrade. True, it’s had a nice run but as people get more confidence in the economy, I think this stock wins.
I agree with JJ’s Home Depot trade, adds Patty Edwards. On average $5,700 goes into every foreclosure to rehab it. That’s a lot of money going into Home Depot and Lowe’s . And elsewhere in the space I'd look at Aeropostale and/ or The Buckle for valuations.
Walmart is another stock worth a look, adds Jeff Tomasulo.
In the space I prefer longTJX, says Pete Najarian.
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5-YEAR AUCTION
U.S. Treasuries prices made slight gains on Tuesday morning after weaker than expected increases in home prices added to the safe-haven appeal of government bonds.
However gains were modest with many investors somewhat reluctant to buy government debt ahead of the auction of $42 billion of five-year notes Tuesday afternoon.
What must you know?
Personally, I’m concerned about higher interest rates going forward, says Jeff Tomasulo. Depending on your outlook I'd play it with the TLT or the TBT , accordingly.
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TOPPING THE TAPE: MEDIA STOCKS
JJ Kinahan has spotted unusual options action in Meredith .
The volume of February 30 calls and volume of February 30 puts suggests a big move one way or the other, Kinahan says. The stock bears watching.
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TRADE TO GO: BANK PLAY
Pete Najarian suggests putting Jefferies on your radar. KBW recently upgraded Jefferies to 'Outperform' from ‘Market Perform’ and put a $30 price target on the stock.
And with the stock hovering near its 200-day moving average it looks attractive to me, says Najarian, I like it just underneath the $24 level.
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CALL THE CLOSE
Pete Najarian: Don’t sell a quiet market.
JJ Kinahan: I’m a buyer of the market. Never sell a slow market.
Patty Edwards: I’d be long individual stocks but short the market.
Jeff Tomasulo: I’m a seller into the close.
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Trader disclosure: On Dec. 29th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders
For Pete Najarian:
Najarian Owns (MMR) Calls
Najarian Owns (BP) Call Spread
Najarian Owns (STX) Calls
Najarian Owns (UUP) Call Spread
For Steve Cortes:
Cortes Owns S&P 500
Cortes Owns U.S. Dollar
Cortes Is Short Godl
Cortes Owns (GD)
Cortes Owns (RTN)
Cortes Is Short (TOL)
Cortes Is Short (PHM)
Cortes Is Short Australian Dollar Futures
Cortes Is Short Mexican Peso Futures
For Steve Grasso:
Grasso Owns (APK)
Grasso Owns (AAPL)
Grasso Owns (ASTM)
Grasso Owns (BAC)
Grasso Owns (BGP)
Grasso Owns (C)
Grasso Owns (COST)
Grasso Owns (CSCO)
Grasso Owns (FAZ)
Grasso Owns (PFE)
Grasso Owns (PRST)
Grasso Owns (WMT)
Grasso Owns (V)
Stuart Frankel & Co. And Its Partners Own (AIZ)
Stuart Frankel & Co. And Its Partners Own (CUBA)
Stuart Frankel & Co. And Its Partners Own (GERN)
Stuart Frankel & Co. And Its Partners Own (GLG)
Stuart Frankel & Co. And Its Partners Own (HSPO)
Stuart Frankel & Co. And Its Partners Own (NWS.A)
Stuart Frankel & Co. And Its Partners Own (NXST)
Stuart Frankel & Co. And Its Partners Own (NYX)
Stuart Frankel & Co. And Its Partners Own (PDE)
Stuart Frankel & Co. And Its Partners Own (PRST)
Stuart Frankel & Co. And Its Partners Own (RDC)
Stuart Frankel & Co. And Its Partners Own (ROK)
Stuart Frankel & Co. And Its Partners Own (TLM)
Stuart Frankel & Co. And Its Partners Own (XRX)
Stuart Frankel & Co. And Its Partners Own (SDS)
Stuart Frankel & Co. And Its Partners Are Short (QQQQ)
Stuart Frankel & Co. And Its Partners Are ShorT (CL)
For 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 (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)
For Dennis Gartman
Funds Managed By Dennis Gartman Own (IP)
Funds Managed By Dennis Gartman Own (DE)
Funds Managed By Dennis Gartman Own (WY)
For Luciano Siracusano
Siracusano Is Chief Investment Strategist Of WisdomTree And Is An Investor In WisdomTree ETFs
Siracusano Owns (EES)
For Jim Ross
Ross Is Senior Managing Director Of State Street Global Advisors And Is
President Of State Street Global Advisors Funds Management, Inc.
Ross Owns (JNK)
Ross Owns (GLD)
For Edward Zabitsky
Zabitsky Is Short (HPQ)
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