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UPDATE: Earnings Deluge Presents Flood Of Trading Opportunities

Friday, 9 Jul 2010 | 5:39 PM ET

Prepare for a deluge of earnings reports next week. Some of the most widely followed companies will all release results - one after another. Take a look:

Monday: Alcoa
Tuesday: Intel, Yum!
Wednesday: Texas Instruments
Thursday: JPMorgan, Google
Friday: Bank of America, Citi, GE

Which reports can you trade? Here's what the Fast Money gang will be watching as well as how they're playing it!

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TAKE YOUR POSITION: ALCOA

Alcoa kicks off earnings season after the bell Monday; and is expected to turn a second-quarter profit after a year-ago loss, but analysts have recently been cutting their forecasts, and one sees the possibility of a return to red ink later this year.

Over the past three months, the price of aluminum has dropped sharply, from over $2,400 per ton in April to around $2,000 on Friday.

How should you be positioned?

Alcoa is out of favor with all my clients, says Steve Grasso. If we see a pop from earnings, I’d sell the strength.

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TAKE YOUR POSITION: BANKS


When Bank of America, JPMorgan , and Citigroup post their quarterly results next week, investors will focus on delinquencies and loan demand to see if the recent improvement in credit quality will last.

Take Your Position
Insight on the earnings season ahead, with the Fast Money crew.

"Investors are very sensitive to a possible deterioration in credit, after what happened in 2008, 2009," says Marshall Front, chairman of investment firm Front Barnett Associates in Chicago.

Comments made on the conference calls with analysts could be crucial in setting the tone, says Anthony Polini, analyst at Raymond James. The executives could spook investors - by saying demand for loans is weak - or they could help shares bounce back with positive comments about credit line utilization picking up, for example, he says.

How should you position?


In the space I like BofA, says Joe Terranova. But it's because I expect their acquisition of Merrill will boost profits.

My ‘tell’ in the space is that analysts have turned very negative lately; don't forget Meredith Whitney recently slashed her Goldman estimates, says Guy Adami. Quite frankly I’m concerned about the headwinds facing the entire space going forward.

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TAKE YOUR POSITION: CSX

On the transports side, the traders think CSX will be the stock to watch with Pete Najarian already spotting some heavy activity in the name.

What’s the trade?

I’ve spotted a great deal of call buying ahead of CSX earnings, says Najarian. That suggest options investors are expecting a move higher.

In the wake of CSX results, I’d look at Kansas City Southern , counsels Guy Adami.

I’d play coal stocks off the backs of the rails, counsels Steve Grasso.

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TAKE YOUR POSITION: YUM

Mark Kalinowski, an analyst at Janney Capital Markets rates Yum a "Buy," based mostly on the company's growth potential outside the United States.

He expects solid results from Pizza Hut but he expects revenue to slip at Taco Bell and possibly at KFC.

What’s the trade?

I like Yum!, says Patty Edwards. I find the story pretty interesting.

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FAST MONEY POLL OF THE DAY

What do you think? We want to know!















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IMPLIED MOVES

Ahead of earnings season, a number of names are seeing larger than average implied moves in the options pits. They follow:

Company Anticipated Move (in either direction)
Alcoa 7% vs. 3.1% Avg.
JPMorgan 4.14% vs. 3.12% Avg.
CSX 6.7% vs. 3.07% Avg.

What should you make of it?

When Alcoa moves it’s often to the downside, explains Mike Khouw. However, I’m feeling good about the rails and I’m not worried about JPMorgan , he adds.

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ALL ABOUT EXPECTATIONS

During this earnings season, analyst expectations may be as important to watch as the profit reports themselves.

According to Michael Block of Phoenix Partners not only should traders pay attention to the results, but they have to carefully monitor how expectations change.

Here's where expectations stand on a handful of names Block brought to the desk:

Low Expectations
Goldman Sachs
Morgan Stanley
Nucor
Steel Dynamics
Source: Michael Block, Phoenix Partners Group

High Expectations
Lincoln National
Hartford Financial Services
EBay
Source: Michael Block, Phoenix Partners Group

What's the trade?

The risk reward is more appealing with stocks that have low expectations, he explains. These stocks are more likely to surprise to the upside.

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Trader disclosure: On July 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; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova owns (GOOG), (AMZN), (MON), (APC),(GMCR), (MYL), (MRVL), (BAC), (ADI), (ADBE), (AKAM), (HES), (CVS), (AXP), (EMC), (ABT); Grasso owns (ASTM), (ABK), (BAC), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST)

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)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (IP)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (AAPL)

For Michael Khouw
Cantor Fitzgerald makes a market in (AA)
Cantor Fitzgerald makes a market in (ACI)
Cantor Fitzgerald makes a market in (AKS)
Cantor Fitzgerald makes a market in (BAC)
Cantor Fitzgerald makes a market in (C)
Cantor Fitzgerald makes a market in (CLF)
Cantor Fitzgerald makes a market in (COST)
Cantor Fitzgerald makes a market in (CSX)
Cantor Fitzgerald makes a market in (CVS)
Cantor Fitzgerald makes a market in (EBAY)
Cantor Fitzgerald makes a market in (FCX)
Cantor Fitzgerald makes a market in (GE)
Cantor Fitzgerald makes a market in (GOOG)
Cantor Fitzgerald makes a market in (GS)
Cantor Fitzgerald makes a market in (HIG)
Cantor Fitzgerald makes a market in (INTC)
Cantor Fitzgerald makes a market in (JPM)
Cantor Fitzgerald makes a market in (LNC)
Cantor Fitzgerald makes a market in (NEM)
Cantor Fitzgerald makes a market in (SHLD)
Cantor Fitzgerald makes a market in (STLD)
Cantor Fitzgerald makes a market in (UNP
Cantor Fitzgerald makes a market in (VALE)
Cantor Fitzgerald makes a market in (X)
Cantor Fitzgerald makes a market in (YUM)

For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AMZN) for clients
Edwards owns (ABT) for clients
Edwards owns (BA) for clients
Edwards owns (BAC) for clients
Edwards owns (BBY) for clients
Edwards owns (BKE) for clients
Edwards owns (BJ) for clients
Edwards owns (C) for clients
Edwards owns (COP) for clients
Edwards owns (COST) for clients
Edwards owns (CVX) for clients
Edwards owns (CVS) for clients
Edwards owns (DELL) for clients
Edwards owns (DO) for clients
Edwards owns (EBAY) for clients
Edwards owns (F) for clients
Edwards owns (FCX) for clients
Edwards owns (GE) for clients
Edwards owns (GLD) for clients
Edwards owns (GOOG) for clients
Edwards owns (GLW) for clients
Edwards owns (HAL) for clients
Edwards owns (HES) for clients
Edwards owns (HIG) for clients
Edwards owns (HPQ) for clients
Edwards owns (INTC) for clients
Edwards owns (JPM) for clients
Edwards owns (JNK) for clients
Edwards owns (MCD) for clients
Edwards owns (MOS) for clients
Edwards owns (MS) for clients
Edwards owns (MSFT) for clients
Edwards owns (NE) for clients
Edwards owns (NSC) for clients
Edwards owns (NVDA) for clients
Edwards owns (PNC) for clients
Edwards owns (QQQQ) for clients
Edwards owns (RIG) for clients
Edwards owns (SLB) for clients
Edwards owns (SPY) for clients
Edwards owns (STI) for clients
Edwards owns (STM) for clients
Edwards owns (TM) for clients
Edwards owns (TM)
Edwards owns (TTM) for clients
Edwards owns (TXN) for clients
Edwards owns (UNP) for clients
Edwards owns (VXX) for clients
Edwards owns (VZ) for clients
Edwards owns (WFC) for clients
Edwards owns (WFT) for clients
Edwards owns (WFMI) for clients
Edwards owns (WMT) for clients
Edwards owns (V) for clients
Edwards owns (XOM) for clients
Edwards owns gold for clients
Edwards owns platinum for clients
Edwards owns silver for clients
Edwards owns the Russell 2000 for clients
Edwards owns the S&P500 for clients

Michael Block
***No Disclosures***

Neil Currie
Neil Currie owns (COST), (CVS), (WAG) & (WFMI)
UBS Securities makes a market in (COST)

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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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