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Halftime Pt. 2: Strong Steel Demand Equals Energy Opportunity?

Citing an improved outlook for metallurgical coal prices, FBR Capital Markets upgraded Walter Energy to 'outperform' from 'market perform' Tuesday.

Having made the call to upgrade WLT, analyst David Khani explained his move on the Fast Money Halftime Report. Looking to 2012, Khani expects greater demand for steel and so Walter got upped. The Tampa, Fla.-based company produces met coal for the steel industry.

Khani likes a few other energy names that deal with metallurgical coal, including Alpha Natural Resources, Peabody Energy and Massey Energy . But don't buy Massey until after earnings, Khani says. He thinks the Richmond, Va.-based company could have a "sloppy quarter" following the worst mining disaster in US history this past spring, where 29 miners were killed in an explosion at its Upper Big Branch mine in Montcoal, West Virginia on April 5.

Watch the video for Khani's complete comments.

What's the Trade?

For Brian Kelly of Kanundrum Capital, 2012 feels like a long ways off. He does not like this space at current levels. China is a major consumer of steel and construction there is slow, he says.

Joe Terranova of Virtus Investment Partners chimed in, saying he does not like Massey Energy.

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CALL TO THE FLOOR: 'CLOSELY' WATCHING EURO STRESS TEST

With 20% of revenues coming from automatic teller machines and European exposure to boot, NCR Corp.CEO Bill Nuti says he's "closely" watching the planned tests of the financial solidity of European banks.

Speaking on Tuesday's Fast Money Halftime Report, Nuti says he's also watching how the euro performs. Things were difficult in Europe last year, he says, but 2010 has been "surprisingly good".

Nuti says business has been improving in the US, too. Budgets are loosening up and financial institutions are adding ATMs, he says. But looking forward, the Duluth, Ga.-based company is eyeing Asia and China in particular. Nuti says the People's Republic recently became the number two market for ATMs. He expects to profit from considerable growth there.

In addition to ATMs, NCR also issues Blockbuster DVD vending machines. Nuti says the company is on-track to install 10,000 kiosks by year-end. It seeks to take marketshare from Redbox, the Coinstar subsidiary that offers $1-per-night rentals from similar vending machines and Netflix , a Web site that also offers DVD rentals.

Watch the full conversation with Nuti here.

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UNUSUAL ACTIVITY: ALLERGAN

Options activity points to more upside for BOTOX-maker Allergan, says Jon Najarian of optionMONSTER.com. Shares of the Irvine, Calif.-based company popped significantly on Friday and again early Tuesday before fizzling out. Najarian thinks this is a play for the upside.

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CALL THE CLOSE:

"Stay hedged," says Patty Edwards of Storehouse Partners.

Brian Kelly of Kanundrum Capital is a seller of the market.

Jon Najarian of optionMONSTER.com thinks the markets could drift higher, but says he's a seller overall.

Earlier in the Halftime Report, Joe Terranova of Virtus Investment Partners said Tuesday’s gains feel like a technical move higher in an oversold market.


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Trader disclosure: On July 6, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Jon Najarian Owns (GS) Call Spreads; Jon Najarian Owns (AAPL) Call Spreads; Jon Najarian Owns (MSFT) Call Spreads; Kelly Is Short (GS); Kelly Owns (BP) Puts; Terranova owns (MON), (AGU), (KO), (XOM), (TEVA), (RDS.A), (GMCR), (UPL), (GS); Terranova owns (GLD) July 123 puts; Terranova owns (GS) JULY 130 CALLS; Terranova owns (GS) JULY 135 CALLS; Terranova is short gold

For Patty Edwards
Edwards Owns (MS) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (C) For Clients
Edwards Owns (AAPL) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (INTC) For Clients
Edwards Owns (MSFT) For Clients
Edwards Owns (YHOO) For Clients
Edwards Owns (HD) For Clients
Edwards Owns (WMT) For Clients
Edwards Owns (GLD) For Clients
Edwards Owns S&P 500 For Clients
Edwards Owns Nasdaq 100 For Clients

For Brian Kelly
Accounts Managed By Kanundrum Capital Are Long Euro
Accounts Managed By Kanundrum Capital Are Short British Pound
Accounts Managed By Kanundrum Capital Are Short (AMZN)
Accounts Managed By Kanundrum Capital Are Short (XLF)
Accounts Managed By Kanundrum Capital Are Short (XLY)
Accounts Managed By Kanundrum Capital Are Short (BCS)
Accounts Managed By Kanundrum Capital Are Short (XLI)
Accounts Managed By Kanundrum Capital Are Short (XLK)
Accounts Managed By Kanundrum Capital Are Short (PCAR)
Accounts Managed By Kanundrum Capital Are Short (NATI)
Accounts Managed By Kanundrum Capital Are Short (BUCY)
Accounts Managed By Kanundrum Capital Are Short (WYNN)

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 (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)


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