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Halftime: Gaming Goldman, Strong Fundamentals Vs Weak Technicals

The Dow continued its winning streak after an upbeat outlook from Caterpillar led stocks higher.

However the financials faced some serious headwinds, after the Treasury announced that it would sell 1.5 billion shares of Citigroup and the Goldman saga intensified with CEO Lloyd Blankfein scheduled to testify on Tuesday.

Goldman presents a particularly difficult trade. Fundamentally, the stock is trading at a discount to its peers but technically the stock is below its 50-day and 200-day moving average – a bearish sign.

What’s the trade?

Instant Insights with the Fast Money traders

If you’re trying to play Goldman, I’d watch the charts, says Tim Seymour. I don’t think this is a case of getting bullish because of valuations.

I added to my Goldman position at $153, counters Zach Karabell of RiverTwice. Given the magnitude of the sell-off in the stock, and their incredible earnings, I think value investors will help propel GS higher.

Looking at Citi, the bull case for this stock is that's it's institutionally under-owned, says Steve Grasso of Stuart Frankel. If you have a 5-year time horizon I’d add to your position on dips, he says.

I like the fact that government is starting to divest its position, says Zach Karabell. It begins to reduce overhang and I also see a lot of upside – but again long-term.

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BLAME MOODY’S?

The more the Goldman Sachs drama unfolds the harder Moody's gets hit, falling 12% since the SEC announcement. Investors fear there’s more litigation risk to come if the securities in question were not rated properly.

What must you know?

I’m short Moody’s, reveals Brian Kelly. As far as I’m concerned it’s just more evidence that they’re selling a product that doesn’t work.

That’s not anything new, adds Tim Seymour.

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MERGER MONDAY

Also merger Monday appears to be alive and well with Hertz buying Dollar Thrifty, Stifel gobbling up Thomas Weisel and more consolidation in the health care space.

What should you be watching?

I’m watching Hertz and Dollar explains OptionMonster Jon Najarian. Both stocks are higher on the news -- likely because regulators are not going to step in. This is a case of a giant rental car company taking out another top company. It’s almost monopolistic. Great for the companies. Not so good for consumers. As a result competitor Avis is also at a 52-week high.

But I would not go downstream and place bets that the business traveler is back, adds Zach Karabell. That’s not what this acquisition says to me.

If you’re looking for an ‘improving econony’ trade, I’d look at long Owens Corning, Louisiana Pacific or USG , says Steve Grasso. They’re all making annual highs. I think we see more bullish activity. But if you get into this space – it’s important to know when the trend ends, it will end quickly.


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TAKE YOUR POSITION: TEXAS INSTRUMENTS

We’re seeing a modestly quiet session for tech ahead of results from communications chipmaker Texas Instruments.

What's your best play on the name ahead of the release?

I like TXN and I’m long, says Brian Kelly, but it seems that most analysts expect a beat and raise scenario. And if we don’t get it, my position won’t be too good. So I’m long puts and short calls against it to protect myself.

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TAKE YOUR POSITION: US STEEL

Today's your last chance to place a trade on US Steel as it gets set to release earnings Tuesday morning.

What’s the trade?

The company isn’t cheap, says Tim Seymour. If you’re looking at this stock as a way to play global recovery, I’d do it with Cemex.

I disagree, counters Steve Grasso. US Steel is the only company that owns their own iron ore and I'm bullish.

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EAR TO THE WALL: MCAFEE

Jon Najarian has noticed unusual activity in McAfee.

The volume of May 40 and May 45 calls as well as the ratio of calls to puts overall suggests to Najarian this stock could make a sharp move higher. Najarian speculates this company could be a takeover target with HP the rumored acquired.

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CALL THE CLOSE:

Tim Seymour: I think the market is going higher.

Jon Najarian: I think financials trade weak on Goldman and Citi news.

Steve Grasso: I’d stay in the market.

Zach Karabell: I’d stay in the market.





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Trader disclosure: On Apr 26, 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 (NDAQ), (DYN), (LPX), (ASTM), (ABK), (BAC), (BGP), (C), (CVGI), (JPM), (NEM), (PRST), (PFE), (BA), (T), (CSCO), (X); Karabell Owns (CAT), (GS), (FXI), (FCX); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (BTU), (NUE); Najarian Owns (C) Calls; Najarian Owns (STEC) Call Spread; Terranova Is Short (CMA), (LCC); Terranova Owns (HES), (TER), (SWN), (XCO), (AXP); Terranova Owns (C) Calls; Scaramucci Owns (GS), Skybridge Owns (GS)

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 (XLU)
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Virtus Investment Partners Owns More Than 1% Of (XLY)
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Sandler O'Neill Served As Financial Advisor To Investor Group That Agreed To Buy First Republic Bank From (BAC)
Sandler O'Neill Recvd. Inv. Bank. Comp. From (C), (JPM) In Past 12 Mos.
(JPM) Was An Investment Banking Client Of Sandler O'Neill In Past 12 Months
Sandler O'Neill Expects To Receive or Seek Inv. Bank. Comp. From (BAC), (BK), (JPM), (C), (NTRS) In Next 3 Mos.
(BAC), (C), (JPM), (MS), (BK), (NTRS) Are Clients Of Sandler O'Neill
Sandler O'Neill Has Received Non-Inv. Bank. Comp. From (C), (JPM), (BAC), (NTRS)
(GS) Is A Non-Inv. Bank. Client Of Sandler O'Neill
Sandler O'Neill Is A Market Maker In (NTRS)

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Citigroup Global Markets Or Affiliates Have Received Investment Banking Compensation From (GLW) For Services Provided In Past 12 Months
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(GLW) Is Or In Past 12 Months Was An Investment Banking Client Of Citigroup Global Markets
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