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Halftime: With Hot Kinect Sales, Is Microsoft a Buy?

Friday, 7 Jan 2011 | 1:49 PM ET

Shares of Microsoft fell in trading Friday despite positive news from CEO Steve Ballmer on Thursday, indicating the technology giant sold more than 8 million of its Xbox Kinect motion-sensing game system in its first 60 days since launch.

Microsoft has been an underperforming stock, but that's not enough of a reason for Patty Edwards to buy shares of MFST.

"It's more of a bank than it is a technology company at this point. It's got so much cash," said Edwards, chief investment officer at Trutina Financial. "And the fact of the matter is, Kinect is really, really, really cool. But it's so small, it's never going to move the needle."

Stuart Frankel's Steve Grasso also likes the Kinect device, but doesn't think it's a catalyst for the stock either.

In the options market, Pete Najarian noted there's been a lot of activity in Microsoft lately. What's changed, however, is that these aren't a lot of out-of-the-money calls. They were going out to March, but it was the 28 calls being bought instead of the 30 or 29 calls.

"It tells me that this move has finally hit itself and I think we'll finally start to see a pause in Microsoft from this level," said Najarian, co-founder of optionMONSTER.com.

Ballmer also told the Consumer Electronics Show that Sprint and Verizon will begin carrying phones based on its fledgling Windows Phone 7 operating software from this year's first half. After the announcements, Microsoft's stock surged through out the day to close at $28.78 a share on Thursday. On Friday, however, it opened at $28.61 and has only continued to fall.

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UNUSUAL ACTIVITY: LAS VEGAS SANDS

Both the volatility and volumes accelerated Las Vegas Sands on Friday, reports Najarian. In terms of its weekly options, there has been "incredible" volume in both the front month options that expire on Friday and those that expire next Friday. Specifically, the Jan. 49 and Jan. 50 weekly calls are now in the money.

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ALCOA AHEAD OF EARNINGS

Aluminum giant Alcoa is set to report quarterly earnings after the closing bell on Monday. The big question on everyone's mind, said Credit Agricole analyst David Lipschitz, is whether they beat.

"If they do beat, then probably the stock has a little bit more upside maybe to $17 to $18," Lipschitz said. "But then, I think supply-demand fundamentals, just there's still too much inventory for you to own Alcoa at those levels."

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The Steel Trade

Lipschitz also addressed steel prices, which he thinks is reliant on what happens with scrap steel. If it falls over in February, as he expects it to, the pricing momentum could end. At that point, steel prices could fall too.

Grasso has been in and out of the steel trade. Right now, he's looking at Arcelor Mittal , a Luxembourg-based steel company. December was a good month for Mittal and because January and February tend to be tough on steel, Grasso wants to short MT. He's overall a seller of steel.

"The handbook is, you buy at the last week of November and you sell at the last week in December and if you want to short, you go short in January," explained Grasso.

Joe Terranova, chief market strategist at Virtus Investment Partners, agreed with Grasso. Apart from Steel Dynamics , he would sell the steel space.

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CALL THE CLOSE

Before the traders signed off on Friday's program, they revealed what plays they plan to make:

Terranova thinks it's time to look at Treasurys and the iShares Barclays 20+ Year Treasury Bond exchange-traded fund in particular.

Grasso is a seller of the market, adding that the 1,260 and 1,257 levels are support on the S&P 500 index.

At these levels in the S&P, Najarian recommends getting some protection.

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Trader disclosure: On Jan. 7, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian owns (BBY) calls; Pete Najarian owns (LVS) calls; Pete Najarian owns (MCD) call spread; Pete Najarian owns (F) bonds; Pete Najarian owns (AXP); Pete Najarian owns (V) call spreads; Pete Najarian owns (HPQ) call spreads; Pete Najarian owns (YHOO); Pete Najarian owns (MSFT) call spreads; Pete Najarian owns (RIMM) call spreads; Pete Najarian owns (MS); Pete Najarian owns (BAC) call spreads; Pete Najarian owns (C); Pete Najarian owns (WLT) call spreads; Pete Najarian owns (CNI); Grasso owns (ASTM); Grasso owns (BA); Grasso owns (BAC); Grasso owns (BWC); Grasso owns (C); Grasso owns (CSCO); Grasso owns (JPM); Grasso owns (LIT); Grasso owns (LPX); Grasso owns (MOT); Grasso owns (MHY); Grasso owns (NDAQ); Grasso owns (PFE); Grasso owns (PRST); Grasso owns (S); Grasso owns (X); Terranova owns (GM); Terranova owns (C); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (PEP); Terranova owns (OXY); Terranova owns (GS); Terranova owns (LTD); Terranova owns (GLD) puts; Terranova owns (SLV) puts; Terranova owns (FCX) puts

For Patty Edwards
Edwards owns (TGT) for clients
Edwards owns (SPY) for clients
Edwards owns (XLB) for clients
Edwards owns (GLD) for clients
Edwards owns (SLV) for clients
Edwards owns (AMZN) for clients
Edwards owns (SBUX) for clients
Edwards owns (MCD) for clients
Edwards owns (F) for clients
Edwards owns (V) for clients
Edwards owns (JNJ) for clients
Edwards owns (AAPL) for clients
Edwards owns (VZ) for clients
Edwards owns (MSFT) for clients
Edwards owns (GS) for clients
Edwards owns (C) for clients
Edwards owns (FXI) for clients

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 (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 (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 (NCRI)
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)

For Steve Grasso
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (AMGN)
Stuart Frankel & Co and its partners own (BP)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GE)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (OPEN)
Stuart Frankel & Co and its partners own (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (RDC)
Stuart Frankel & Co and its partners own (TLM)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UNM)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)

For Peter Boockvar
Boockvar has no disclosures

For David Lipschitz
Credit Agricole Securities receives or has received compensation from (AA) for non-investment banking services in the past 12 months
Credit Agricole Securities receives or has received compensation from (FCX) for non-investment banking services in the past 12 months
Credit Agricole Securities receives or has received compensation from (STLD) for non-investment banking services in the past 12 months
Credit Agricole Securities receives or has received compensation from (X) for non-investment banking services in the past 12 months
An affiliate of Credit Agricole Securities received compensation from (X) for non-investment banking products/services in the past 12 months
Credit Agricole Securities receives or has received compensation from (ANR) for non-investment banking services in the past 12 months
Credit Agricole Securities or its affiliates managed or co-managed a public offering of (ACI) securities in the past 12 months
Credit Agricole Securities or its affiliates participated in a public offering of (ACI's) securities or received compensation for investment banking services in the past 12 months
Credit Agricole Securities receives or has received compensation from this (ACI) for non-investment banking services in the past 12 months
Credit Agricole Securities or its affiliates managed or co-managed a public offering of (CNX) in the past 12 months
Credit Agricole Securities or its affiliates participated in a public offering of (CNX) or received compensation for investment banking services in the past 12 months
Credit Agricole Securities receives or has received compensation from (CNX) for non-investment banking services in the past 12 months
Credit Agricole Securities receives or has received compensation from (BTU) for non-investment banking services in the past 12 months
Credit Agricole Securities receives or has received compensation from (WLT) for non-investment banking services in the past 12 months

GE is the parent company of CNBC
NBC Universal is the parent company of CNBC

CNBC.com with wires.

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