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UPDATE: Unstoppable Metals Still a ‘Buy’?

Monday, 6 Dec 2010 | 5:17 PM ET

With the S&P struggling to break above the critical 1220-1225, the Fast traders turned attention to another area of the market – one they say is working. We're taking metals.

The desk is particularly interested in the action in silver after it settled at the highest level in over 30 years.

Some find the move curious in the wake of comments made by Ben Bernanke over the week-end in a “60 Minutes” interview. The Fed chief said the economy was still struggling to become "self-sustaining" without government help.

If Bernanke's cautious about the economy, why is silver – an industrial metal - at a 3-decade high? And perhaps more important, how should you trade?

Instant Insights with the Fast Money traders

Silver’s surge was incredible, says Dennis Gartman. But I wouldn’t ride the momentum, he counsels. Don’t sell it short but I’d be reticent to get in at what I consider an obscene level.

I like silver more than gold, says Guy Adami, and I suspect it has room to run. And if you like silver you should also like Silver Wheaton.

The move in silver feels like a short squeeze to me, muses Tim Seymour. But that’s not to say there’s isn’t more room to run.

I’ve been bullish silver since August, says Brian Kelly, but I took gains on Monday in my position in the Silver ETF. And I would not establish a new position right here. If anything, I'd consider a stock replacement strategy going forward - if I was bullish, I’d trade calls to limit my downside.

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

I believe the move higher in silver has everything to do with the competitive currency devaluation that seems to be going on all around the world, says Joe Terranova. And that shows no signs of stopping.

If you’re looking for a downstream trade look at the CME, adds Terranova. They’re likely to raise margins.

Also, David Einhorn’s comments about precious metals – both silver and gold - on CNBC, probably generated positive catalysts, adds Jon Najarian. But I agree that the competitive devaluation of currencies probably pushes more investors into metals.

(As you may know, on CNBC's Squawk Box, David Einhron came out in favor of gold. ”We own gold and we’re going to continue to own gold as long as we think the monetary and fiscal policies don't make sense,” he said.

Elsewhere in the space, if you’re bullish copper I’d trade it long Freeport McMoRan against puts for protection, adds Terranova.

* comments above were compiled from both Halftime and Fast at 5p.

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DEVELOPING STORY: GOVERNMENT TRIES TO EXIT CITI

In other areas of the market, the traders were taking a long hard look at financials after word surfaced after hours that the government was about to exit Citigroup .

The U.S. Treasury said it planned to sell approximately 2.4 billion shares; that the sale would begin immediately and would end when the government determined that it had received an acceptable price.

What’s the trade?

Things may be getting better in the financials, adds Guy Adami, but quite frankly I think there are better places to put your money.

* Raymond James analyst Anthony Polini tells the desk Citi is a top pick and suggests investors buy where the deal is priced. “It could be an $8 or $9 dollar stock," he says, "it’s just a question of when it gets there.”

Check out our entire conversation with Polini. Watch the video now!



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Trader disclosure: On December 6, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour Owns (AAPL), (BX), (CSCO); Terranova Owns (OIH), (UPL), (C), (PEP), (VRTS), (AAPL), (GS), (OXY), (NKE), (CMA), (PFE); Terranova Owns (FCX), (FCX) Puts; Adami Owns (AGU), (C), (GS), (INTC), (BTU), (NUE), (MSFT); Jon Najarian is long (CBOE) stock, short (CBOE) calls. Jon Najarian is long (DRYS) stock, short (DRYS) calls. Jon Najarian is long (MTW) stock, short (MTW) calls. Jon Najarian is long (WHR) stock, short (WHR) calls. Jon Najarian is long (GAS) stock, short (GAS) calls. Jon Najarian is long (AAPL) call spreads. Jon Najarian is long (YHOO) call spreads. Jon Najarian is long (XLF) call spreads. Jon Najarian is long (MS) call spreads. Jon Najarian is long (GS) call spreads. Jon Najarian is long (NFLX) call spreads;

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (ALK)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EPR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
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 (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
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 (XLE)
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 (CLB)
Virtus Investment Partners Owns More Than 1% Of (DRYS)


For Dennis Gartman
Accounts Managed By Gartman Are Long Australian Dollar
Accounts Managed By Gartman Are Short Euro
Accounts Managed By Gartman Are Short Yen
Accounts Managed By Gartman Are Long Gold


For Mike Khouw
Cantor Fitzgerald & Co. Is A Market Maker In (AAPL)
Cantor Fitzgerald & Co. Is A Market Maker In (AMD)
Cantor Fitzgerald & Co. Is A Market Maker In (AOL)
Cantor Fitzgerald & Co. Is A Market Maker In (APOL)
Cantor Fitzgerald & Co. Is A Market Maker In (BWLD)
Cantor Fitzgerald & Co. Is A Market Maker In (CMCSA)
Cantor Fitzgerald & Co. Is A Market Maker In (CMCSK)
Cantor Fitzgerald & Co. Is A Market Maker In (CVC)
Cantor Fitzgerald & Co. Is A Market Maker In (DF)
Cantor Fitzgerald & Co. Is A Market Maker In (FCX)
Cantor Fitzgerald & Co. Is A Market Maker In (FDX)
Cantor Fitzgerald & Co. Is A Market Maker In (GOOG)
Cantor Fitzgerald & Co. Is A Market Maker In (HRB)
Cantor Fitzgerald & Co. Is A Market Maker In (MCP)
Cantor Fitzgerald & Co. Is A Market Maker In (MEE)
Cantor Fitzgerald & Co. Is A Market Maker In (MSFT)
Cantor Fitzgerald & Co. Is A Market Maker In (NFLX)
Cantor Fitzgerald & Co. Is A Market Maker In (OSK)
Cantor Fitzgerald & Co. Is A Market Maker In (SD)
Cantor Fitzgerald & Co. Is A Market Maker In (SLV)
Cantor Fitzgerald & Co. Is A Market Maker In (UPS)
Cantor Fitzgerald & Co. Is A Market Maker In (X)
Cantor Fitzgerald & Co. Is A Market Maker In (YHOO)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (TBT)
Accounts Managed By Kanundrum Capital Own (GDXJ)
Accounts Managed By Kanundrum Capital Own (DRYS) Calls
Accounts Managed By Kanundrum Capital Own (RDC)
Accounts Managed By Kanundrum Capital Own (AAPL)
Accounts Managed By Kanundrum Capital Own (QCOM)
Accounts Managed By Kanundrum Capital Own (DE)
Accounts Managed By Kanundrum Capital Own (MON)
Accounts Managed By Kanundrum Capital Own (IPI)
Accounts Managed By Kanundrum Capital Own (POT) Calls

For Doug Kass
Seabreeze Partners Management Owns (MSFT), (MSFT) Calls
Seabreeze Partners Management Owns (YHOO), (YHOO) Calls
Funds Managed By Dennis Gartman Own (BPT)
Funds Managed By Dennis Gartman Are Short (DB)

For Vitaliy Katsenelson
Investment Management Associates Owns (LLL)
Investment Management Associates Owns (MDT)



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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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