The Dow tip-toed past 11,000 on Monday with investors feeling cautiously optimistic about earnings season.
Adding to the tailwinds, EU leaders agreed on a rescue package for Greece.
However the Fast Money traders are most focussed on a note from Citi, which says the rapidly rebounding economies of China and India will buoy demand for major coal producers such as Arch Coal and Patriot Coal.
What must you know?
Coal companies sell both metallurgical and thermal coal, the latter used by utilities to generate power. Thermal coal sales have tumbled in the West due to the recession.
Yet metallurgical coal, used to make steel, is selling briskly in economies that have rebounded the fastest, namely Asia.
How should you trade it?
Strategy Session with the Fast Money traders
I think Citi may be a little late to the party, but I wouldn’t go short metallurgical coal producers either says emerging markets trader Tim Seymour. What I think we’re seeing is analysts having to price in significantly higher underlying commodity prices. And not only in coal. I think we've seen it in iron ore and we're about to see the same in steel.
I’d also watch the action in thermal coal names, says Jon Najarian. RRI Energy and Mirant agreed to merge forming one of the largest independent power producers in the US, he explains That’s all about thermal coal.
Elsewhere in commodities, with the price of iron ore going through the roof, I’d look at US Steel, counsels Steve Grasso of Stuart Frankel. It’s the only one with it’s own iron ore. It gives this stock a premium advantage to all others.
US Steel is a high cost producer in a low cost world, reminds Zach Karabell. I’d be careful.
CHART OF THE DAY: DOLLAR INDEX
The dollar might not be as strong as many traders believe. According to technical analysis the greenback is about to break its 50-day moving average on the downside.
What must you know?
I’d be careful of the dollar at this level, says Tim Seymour. And if we see the move mentioned above I think it could be bullish for ConocoPhilips, Chevron and Exxon.
PALM ON FIRE
The Fast Money traders are keeping a close eye on the action in Palm . According to published reports, Palm has hired bankers including Goldman Sachs to explore several options, including a sale of the company.
According to Reuters, Suitors would likely pay more than $1 billion for Palm, given its market value of $870 million as of Friday's close, and the average deal premium of 30 percent for a technology company, bankers said. The buyer would face additional integration costs.
What’s the trade?
I sold out of my position in Palm stock, reveals Jon Najarian, and I'm now only playing it with call spreads so I can define my risk.
I wouldn’t touch Palm at all, says Zach Karabell. It’s a bet – nothing more.
EAR TO THE WALL: MANITOWOC
OptionMonster Jon Najarian has spotted unusual options activity in Manitowoc .
A high volume of April 15 calls suggest to him this stock could make a sharp move higher.
This stock is so far off it’s highs I think it’s incredibly attractive at current levels, says Zach Karabell.
TOO LITTLE TOO LATE?
FBR upgraded Best Buy on Monday to market perform from underperform. While the stock is flat in today's session, it has outperformed the last month, rallying over 12%.
What must you know?
Stephen Chick, the analyst who made the call, tells Fast Money he’s turned bullish on this stock on the possibility that it might acquire smaller chain RadioShack .
He compared it to Best Buy's 50 percent ownership of U.K.-based Carphone Warehouse, which has influenced Best Buy's cell-phone strategies.
But Chick said he didn't know how the market would react to any such deal, since on one hand the acquisition would be good for earnings, but on the other hand there is inherent risk in integrating two companies.
*Find out more! Watch our entire interview with Stephen Chick in the video clip!
TAKE YOUR POSITION: AA
Earnings season kicks of on Monday after the bell, with Alcoa releasing its quarterly results.
What's the play?
I think you’ll be able to buy the stock cheaper after the earnings, says Tim Seymour.
CALL THE CLOSE
Tim Seymour: I think the market breaks 1200 on Monday.
Jon Najarian: I see more upside.
Zach Karabell: Don’t get in the way of a relentlessly dripping up market.
Steve Grasso: I’m a buyer of the market and I expect it to be higher Friday.
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Trader disclosure: On Apr 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Grasso Owns (AAPL), (C), (BAC), (WMT), (T), (LPX); Karabell Owns (FCX); Karabell Owns (AAPL) ; Jon Najarian Owns (PALM) options; Jon Najarian Owns (CAR) options; Adami Owns (INTC), (GS), (AGU), (MSFT), (NUE), (BTU), (C); Terranova Owns (HES), (TER), (AXP), (MOS), (APA), (YHOO); Terranova Is Short (LCC); Pete Najarian Owns (AA) Call Spread ; Pete Najarian Owns (BAC) Calls; Pete Najarian Owns (C) Calls; Najarian Owns (DD) Call Spread ; Najarian Owns (DOW) Call Spread; Najarian Owns (LVS) Call Spread; Najarian Owns (MRVL); Najarian Owns (PCX) & Short (PCX) Calls; Najarian Owns (STX) Call Spread; Najarian Owns (TSO) Calls; Najarian Owns (YUM) Call Spread; Najarian Owns (YHOO) Call Spread; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leap; Finerman Owns (BAC), (JPM); Finerman's Firm Owns (TJX), (BBY), (JPM), (AEO), (IBB)
Other Relevant Disclosures:
Credit Suisse Does and seek to do business with companies covered in its research reports (JPM)
Stuart Frankel & It's Partners Own (LPX)
Stuart Frankel & It's Partners Own (SDS)
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