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Halftime: 'This Trade' About To Burn Investors?

Steve Grasso as well as other Fast Money traders caution retail investors not to run after this trade.

They’re talking about the white hot ag trade which has taken off like a shot.

In fact, on Monday corn generated its second-biggest gain on record while soybeans touched their highest level in over a year.

On the belief that higher corn prices give farmers more money to spend on fertilizer and encourage more planting, WJB’s farm machinery index, which is comprised of farm equipment makers including Deere and CNHGlobal, appears to be breaking out.

Why is Grasso as well as most of the desk telling retail investors to step aside? Shouldn’t you participate in the gains?

Instant Insights with the Fast Money traders

Most investors who trade this space aren’t quick to sell, explains Steve Grasso and these stocks can turn against you very rapidly. If you’re a retail investor and you’ve missed it already I’d stay on the sidelines. If you’re a pro I think there could be a little more upside in Deere but, again, I wouldn’t jump into the ag trade broadly.

In this space, make sure you know what you’re buying, adds Brian Kelly. For example the Commodities ETF traded lower Monday because it’s not only made up of grains but it also contains hog and cattle futures. Higher corn prices means it costs more to feed the livestock.

As we mentioned above, the move higher in farm machinery makers has been so quick and sharp I agree that retail investors should not get involved, says Patty Edwards. If you want a stock pick, you can look at Syngenta .

If you 'do' want to trade it, I’d look at fertilizer stocks such as Mosaic , Agrium and IPI, says Stephen Weiss, author of The Billion Dollar Mistake. And I’d look to the derivative trades such as railroad CSX. Or look at dry bulk, carriers such as Genco – a big grain shipper.

It’s important to note that not only demand for crops but also demand for coal drives volumes in CSX, reminds host Melissa Lee.

I’m cautious of the rails, counters Steve Grasso. They could be a little toppy based on freight loads.

*Hear more about the ag trade from Dan Smith of Top Third Ag. Watch the video now!

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M& A TRADE... GYMBOREE

Turning attention to Merger Monday, Bain Capital agreed to take children's retailer Gymboree private in a $1.8 billion deal. The price represents a premium of 23.5% to the stock's closing price on Friday. However, the offer values the company at a 57% premium to the stock's trading price before reports on a possible sale of the company made the rounds on September 30.

How should you position now?

In the space I’d look at Children’s Place, says Patty Edwards, as another possible takeout candidate.


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TAKE YOUR POSITION: INTEL


The Street is keeping an eye on Intel, due to report earnings Tuesday after the close. In August, the company cut its sales forecast to $11 billion due to weaker PC and Jefferies said the semis are in for further pain.

How should you position?

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Trader disclosure: On Oct.11, 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 (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Brian Kelly
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (GPRE)
Accounts managed by Kanundrum Capital own (JJG)
Accounts managed by Kanundrum Capital own (SGG)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (AGM)
Accounts managed by Kanundrum Capital own (MSFT)
Accounts managed by Kanundrum Capital own (FRO)
Accounts managed by Kanundrum Capital own (GLGC)
Accounts managed by Kanundrum Capital own (GS)
Accounts managed by Kanundrum Capital own (JEF)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (UUP)
Accounts managed by Kanundrum Capital are short (HYG)
Accounts managed by Kanundrum Capital are short (SLF)
Accounts managed by Kanundrum Capital are short U.K. Pound
Accounts managed by Kanundrum Capital are short Mexican Peso

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AMGN)
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 (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
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 (TLM)
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)

For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (GE) for clients
Edwards owns (GOOG) for clients
Edwards owns (INTC) for clients
Edwards owns (JPM) for clients
Edwards owns (MSFT) for clients
Edwards owns (SYT) for clients
Edwards Owns (GLD) For Clients
Edwards Owns (PGM) For Clients
Edwards Owns (SYT) For Clients
Edwards Owns (MSFT) For Clients
Edwards Owns (AMZN) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (C) For Clients
Edwards Owns (CME) For Clients
Edwards Owns (INTC) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (AAPL) For Clients

For Steve Weiss
Weiss owns (MOS)
Weiss owns (IPI)
Weiss owns (HK)

For Dan Smith
Top Third Ag. Marketing trades Corn on behalf of clients

CNBC.com with wires.

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DE
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