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Early Sign That Apple’s Meteoric Rise Nearing End?

Wednesday, 27 Oct 2010 | 5:33 PM ET

Shares of Apple sold off in extended trade after the company said in an SEC filing that it sees gross margin percentage decreasing in future periods compared to levels achieved during 2010.

The company forecast gross margin levels of about 36% in the first quarter of 2011, about 1.5% below analyst expectations. (According to our news partner, Reuters, analysts on average were expecting gross margins of 37.5%)

The company said higher costs associated with its "innovative products" were causing the weaker margins.

Word on the Street
The Fast Money traders take a look at today's top business stories.

Is the stock priced for perfection? How should you position now?

The market is over reacting in the after hours, says Brian Marshall of Gleacher. We're not talking about a tremendous fall-off in margins, just a decline and that makes sense. I had expected gross margins to decline and factored that into my estimtes. My price target remains $355.

Gross margins are only part of the story, adds Karen Finerman. Operating margins are still very fat. If the stock breaks below $300 I’m a buyer.

If Apple trades down between $290-$300, I’m also buyer, says Joe Terranova. I don’t think this changes the trajectory at all.

Hedge funds are wading into the stock right now, adds Anthony Scaramucci, including guys like Einhorn. I suspect long-term it goes higher.

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TOPPING THE TAPE...TEFLON TECH

Teflon tech topped the tape Wednesday with Broadcom the top performer in the S&P after stellar earnings.

In fact, chips as well as cloud names, and RIM all pushed the Nasdaq to its 6th straight gain.

What should you make of it?

A few weeks back there was a shake out in cloud stocks and now investors are rushing to get back into Riverbed, F5, and Saleforece, muses Joe Terranova. Watch this space carefully.

I’d wait for pullbacks, but they come, that’s the time to buy, says Pete Najarian.

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CHART OF THE DAY: VOLATILITY CREEPING UP 5 DAYS

Amid Wednesday’s triple digit sell-off and bullish reversal the traders were closely watching the action in the Vix.

What should you make of it?

The move in the Vix suggests either fear is creeping back or complacency is ebbing out, says Karen Finerman. It’s either investors looking for protection or making bets the market will sell-off.

My bias is protection, says Pete Najarian. Although the Vix is moving to the upside it's not spiking higher.


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FAST FIXED INCOME: WATCHING RATES

Lowered expectations of QE2 caused bonds to falter and 10 year yields to hit their highest level since September 20th.

How should you trade?

I’d buy the TLT if the yield stays at this level, says Brian Kelly.

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MARKET MYSTERY: BANK OF AMERICA

The moves in BofA present a little market mystery; shares climbed again on Wednesday all while investors clamored for "putback payback."

What’s the trade?

I jumped into BofA as well as Morgan Stanley on Wednesday, reveals Pete Najarian, but I’m concerned that I’m early.

I think there’s a tremendous opportunity in this space, says Joe Terranova. I’d look at JPMorgan, Citi, Goldman , and American Express. I see bottoming action in all these names.





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Trader disclosure: On Oct. 27, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Scaramucci and SkyBridge Capital own (AAPL); Scaramucci and SkyBridge Capital own (BAC);Scaramucci and SkyBridge Capital own (XOM); Scaramucci and SkyBridge Capital own U.S. Dollars; Finerman owns (AAPL); Finerman & Finerman’s Firm owns (BAC); Finerman’s Firm owns (BKS); Finerman’s Firm owns (FLS); Finerman’s Firm owns (MSFT); Finerman’s Firm owns (POT) options; Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Pete Najarian owns (AKAM) call spread; Pete Najarian owns (BAC); Pete Najarian owns (POT) call spread; Terranova owns (APA), (AAPL), (AXP), (C), (CRM), (FCX), (GOOG), (GS), (IBM), (ISRG), (JPM), (MCD), (MDT), (MMM), (NBR), (NKE), (ORCL), (PEP), (PCP), (TBT), (TLT), (UPL), (VRTS), (XBI)

For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (IGE)
Virtus Investment Partners own more than 1% of (LDR)
Virtus Investment Partners own more than 1% of (LPHI)
Virtus Investment Partners own more than 1% of (MGRC)
Virtus Investment Partners own more than 1% of (NRCI)
Virtus Investment Partners own more than 1% of (DBV)
Virtus Investment Partners own more than 1% of (XLB)
Virtus Investment Partners own more than 1% of (XLP)
Virtus Investment Partners own more than 1% of (XLY)
Virtus Investment Partners own more than 1% of (XLF)
Virtus Investment Partners own more than 1% of (XLI)
Virtus Investment Partners own more than 1% of (XLU)
Virtus Investment Partners own more than 1% of (SUBK)
Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DRYS)

For Brian Kelly
Accounts managed by Kanundrum Capital own (JEF)
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 (PPLT)
Accounts managed by Kanundrum Capital own (REE)
Accounts managed by Kanundrum Capital own (MCP)
Accounts managed by Kanundrum Capital own (POT)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (JO)
Accounts managed by Kanundrum Capital own (JJG)
Accounts managed by Kanundrum Capital own (SGG)
Accounts managed by Kanundrum Capital own (NIB)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (XHB)
Accounts managed by Kanundrum Capital own (HD)
Accounts managed by Kanundrum Capital own (AWI)

For Jan Van Eck
Van Eck is a principle in firm that is sponsoring the Rare Earth/Strategic Metals ETF

For Brent Thill
A member of Thill’s team owns (MSFT)
(MSFT) within the past 12 months has been an investment banking client of UBS
(MSFT) within the past 12 months has been a non-investment banking securities-related client of UBS
(MSFT) within the past 12 months has been a non-securities services client of UBS
UBS has received compensation from (MSFT) within the past 12 months

For Mike Khouw
Cantor Fitzgerald makes a market in (CSTR)
Cantor Fitzgerald is long (CSTR) calendar spreads

For Jeff Saut
***No Disclosures***


CNBC.com and wires

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