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M&A Explosion: Trading A Market Awash In Deal Chatter

It almost feels like America is on sale considering the sheer volume of deal speculation in the market right now.

There’s talk that Jacobs Engineering may be taken over by private equity investors.

Then there’s the chatter about EchoStar and Tivo. In a note to clients Citi analyst Jason Bazinet cited four factors that he interpreted as signs of a potential merger.

Don’t forget the hostile bid for Casey's General Stores made by Canada’s Couche-Tard for $1.85 billion of $36/share. (It was rejected as too little)

And, Peabody and Macarthur remain locked in a tug of war.

With all the wheeling and dealing what must you know to trade this market?

Strategy Session with the Fast Money traders

All this M&A says to me valuations in certain sectors are attractive, says Tim Seymour. That's my takeaway.

If you think M&A will continue I’d keep a close eye on the insurance sector, counsels Joe Terranova. They’ve lagged in M&A and I think they catch up.

Also keep on eye on the potential deal between United and US Airways, Terranova adds. I'd play it short US Airways because I think these developments might force Continental to make a counter offer so they can merger with United.

Don't forget about BHP , reminds Steve Grasso. They're rumored to be looking to make an acquistion in ag. My clients think Mosaic is in play.

I don’t like speculating about where there’s smoke, I like playing where there’s fire, says Karen Finerman. In other words why play market rumor when you can buy stocks that have 'actual bids'. I think those risk-rewards are better. I’m much more interested in Casey as well as Alcon , she explains. Both companies have suitors.

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3 BIG IPO'S

Also, IPO activity appears to be picking up.

U.S. private equity firms KKR and Bain Capital are preparing for initial public offerings of Toys "R" Us and NXP SemiConductors.

And Tennessee-based hospital chain HCA Inc., is preparing for re-entry into public life via an initial public offering that could raise more than $3 billion.

The timing of these clever IPOs is interesting.

Is it the beginning or is it a result of a very frothy market?

I don’t think it’s a sign of the top, says Karen Finerman. I think it’s a sign of the beginning.

I agree with Karen, says veteran trader Gary Kaminksy. I think it’s a healthy situation. And it just re-reinforces my belief that the market will continue to melt-up.

I’m concerned about the HCA IPO , counters Steve Grasso. The activity in the health care sector makes me think it’s frothy. In this case I think it's a sign of the top.

If you’re looking for a trade look at Blackstone or Morgan Stanley, says Brian Kelly. They both benefit from an increased M&A environment.

Or look at Lazard and Greenhill , reminds Karen Finerman.

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HOW TO TRADE OIL?

Although oil appears to be stuck in a trading range around $80, there are plenty of single stock stories in the sector that are making big moves.

What names should you be watching?

I’d move away from high beta plays such as the USO or OIH, counsels Joe Terranova. With the front of the board under pressure I’d look at integrated names. Check out the following:

Joe's Likes Joe's Dislikes
Suncor USO
Hess Oil Futures
Occidental

With oil above $85 I’d go for the more levered plays in the oil space, says Tim Seymour. But I’m a little negative on refiners.

Tim's Likes Tim's Dislikes
Conoco Chevron
BP
Exxon

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THE STEEL TRADE

The steel names really under-performed this week. Is this trade dead money or should you get back in?

It seems to me US Steel is exhausted, says Tim Seymour. I don't like seeing Letter X closing lower on a day when we saw commodities rally.

I’d short AK Steel, counsels Steve Grasso. Technically steel is a little over-bought.

If you want a low beta play I’d look at Steel Dynamics, counsels Joe Terranova.

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UNDER THE RADAR: VULCAN MATERIALS

Brian Kelly has spotted a stealth signal which may be bullish for housing.

In an exclusive post for CNBC, Kelly writes “One of our favorite leading economic indicators is rail-car loadings — simply put, before a product is consumed it must get to the retailer and rail is major part of that supply chain. In the first quarter, intermodal traffic experienced a large increase as inventories were replenished.”

What’s the trade?

My favorite play on the emerging trend in the construction industry is Vulcan Materials, he says, Click here for Kelly’s in-depth analysis.

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GREECE FACING HIGH DRAMA THIS WEEKEND

Worries about Greece's debt problems, which have weighed on stocks for weeks, eased after a European Union source said policy-makers had reached an agreement on terms of possible emergency loans for Athens.

The news allowed traders to shrug off a downgrade by Fitch of Greece's credit rating by two notches, to one grade above junk status.

With expectations quite high that a bailout will materialize as soon as this week-end what happens if it falls apart again?

Get that latest insights from David Riedel Of Riedel Research. Watch the video now!




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Trader disclosure: On April 9, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (HES), (TER), (AXP), (YHOO), (APA),; Terranova Is Short (LCC), (XLY); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM): Finerman's Firm Is Long S&P Puts: Finerman Owns (AAPL), (USO); Finerman's Firm Owns (BAC), (BAC) Leap; Finerman Owns (BAC) Preferred, (BAC), (BAC) Calls; Finerman's Firm Owns (CASY); Finerman's Firm And Finerman Own (JPM); Finerman's Firm And Finerman Own (BBY); Finerman's Firm And Finerman Own (WFC) Preferred; Grasso Owns (LPX), (ASTM), (ABK), (AAPL), (BAC), (BGP), (C), (CVGI), (COST), (JPM), (NEM), (PRST), (WMT), (PFE), (BA), (T); Iuorio Owns (AAPL), (WMT), (FXA), (FXC); Iuorio Owns (SPY) Calls; Iuorio Owns (QQQQ) Calls; Iuorio Owns (USO) Puts; Iuorio Owns (GLD), (GLD) calls; Iuorio Owns (FXE) Puts; Jon Najarian Owns (PALM); Jon Najarian Owns (JPM) Preferred; Jon Najarian Owns (GOOG) Put Spreads, Owns (AAPL) Call Spreads; Kelly Owns (NBG), (FRE); Karabell Owns (FCX); Seymour Owns (AAPL), (AA), (BAC), (BP), (INTC), (MSFT)

For Tim Seymour
Seygem Asset Management Owns (POT)

For JoeTerranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (XLU)
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 (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLI)

For Steve Grasso
Stuart Frankel And Its Partners Own (LPX)
Stuart Frankel And Its Partners Own (CUBA)
Stuart Frankel And Its Partners Own (CVGI)
Stuart Frankel And Its Partners Own (GERN)
Stuart Frankel And Its Partners Own (HSPO)
Stuart Frankel And Its Partners Own (MERC)
Stuart Frankel And Its Partners Own (NWS.A)
Stuart Frankel And Its Partners Own (NXST)
Stuart Frankel And Its Partners Own (NYX)
Stuart Frankel And Its Partners Own (PDE)
Stuart Frankel And Its Partners Own (PFE)
Stuart Frankel And Its Partners Own (PRST)
Stuart Frankel And Its Partners Own (RDC)
Stuart Frankel And Its Partners Own (TLM)
Stuart Frankel And Its Partners Own (XRX)
Stuart Frankel And Its Partners Own (SDS)
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (CL)
Stuart Frankel And Its Partners Are Short (AAPL)

For Brian Kelly
Kanundrum Capital Owns (MS)
Kanundrum Capital Owns (FRE)
Kanundrum Capital Owns (FNM)
Kanundrum Capital Owns (VMC)
Kanundrum Capital Owns (POT)
Kanundrum Capital Owns (GOOG)
Kanundrum Capital Owns (NBG)
Kanundrum Capital Is Long Dollar
Kanundrum Capital Is Long Treasuries
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short Yen
Kanundrum Capital Is Short Franc


CNBC.com with wires

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