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Halftime: Trading Tech as Chip Stocks Drive Gains

The Semiconductor ETF landed in the spotlight Monday with the Street closely watching the action in chip stocks after
Barron’s said Nvidia “could well surge another 80% over the next year” citing its aggressive position in mobile computing.

Meanwhile, Apple posted its first day of gains since the news of Steve Jobs' medical leave.

However, tech bulls got their biggest boost from Intel , which raised its dividend by 15 percent and authorized another $10 billion for stock repurchases.

”The Intel buy back is bigger than the McAfee acquisition and more than Intel is investing in US plants,” explains host Melissa Lee.

In a Reuters interview Howard Ward, portfolio manager of the GAMCO Growth Fund speculated that Intel's buyback may be a sign larger technology companies are looking for ways to reward investors." "The Intel news is part of what's helping some of the big technology stocks do well today," he said.

How should you trade chip and big cap tech in the wake of these developments?

Instant Insights with the Fast Money trader

Pete Najarian is excited about Intel's buy-back as well as big cap tech broadly - names such as Microsoft and IBM. “There’s real strength there. This market is defying everything and moving to the upside. If you expected the market to be flat (because of other catalysts) you'd have been mistaken.”

Brian Kelly isn’t a buyer of Microsoft, at least not at these levels. “I’d rather buy on a pullback,” he says. And although he admits the whole chip space is on fire he can't get excited about the Intel buy back, either. “Why aren’t they buying growth? I’d much rather see them buy something in mobile or graphics to really expand their base,” Kelly says.

Zach Karabell adds "Intel may be a bellwether but it's not a name I'm jumping up and down about." He's more interested in Texas Instruments. With Nvidia is in the sweet spot of graphics and communications, he's interested to hear what TXN has to say.

Steve Grasso is cautious on both Microsoft and Intel. “If they’re out of love, they’re out of love and they usually stay that way,” he says.

On top of that Grasso sees gains in the chip stocks as somewhat concerning, merely because the market seems to generate new leadership almost every day. “That’s a problem,” he says. “Traders don’t know where they want to put their money. As a result, he’s cautious. “I think we’re going to correct.”

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MATERIALS

Material stocks topped the tape on Monday after last week's pullback.

How should you game the space, now?

I wouldn’t get caught short steel stocks, says Steve Grasso.

I like Alcoa or United Rusal due to chatter that things made from copper may soon be made from aluminum, says Brian Kelly.

Copper needs to be much more expensive than it currently is for aluminum to be a good replacement, counters Zach Karabell.

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GRAINS

Soft commodities also traded higher on Monday, with cotton , lumber and wheat outperforming.

What's the trade?

This is the sector I like the most, says Brian Kelly. Supply disruption could power prices higher as well as global growth.

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INTO THE EARNINGS GRINDER

The traders are also watching McDonald's, which reported a higher quarterly profit but slow December sales. Also the company said it would raise some prices due to rising commodity costs.

What's the trade?

Technicals suggest to me it’s a buy, says Steve Grasso with a stop at $73. And I’m out around $77.

For me McDonald’s is about international growth, says Pete Najarian. So is Yum! As long as the overseas markets, particularly Asia, remain strong I’m a buyer.

In this space, I’ve got Chipotle on my radar, says Brian Kelly. I’d think rising inputs costs are a problem for them. Considering their current P/E I'd look to the short side of this trade.

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UNUSUAL ACTIVITY: SEABRIDGE GOLD

Pete Najarian has spotted unusual activity in Seabridge Gold.

A large buyer of the May 30-35 call spread has led to speculation this stock could make a sharp move higher.



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Trader disclosure: On Jan. 24, 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 (F) bonds and calls. Pete Najarian owns (V) call spreads. Pete Najarian owns (YHOO). Pete Najarian owns (MS). Pete Najarian owns (C). Pete Najarian owns (BAC) call spreads. Pete Najarian owns (GE). Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MHY), (NDAQ), (PFE), (PRST) and (S). Zachary Karabell owns (CSCO), (IBM), (GS), (GOOG), (FCX), (AAPL), (GE), (POT) and (FXI).

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

Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (ABX)
Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NEM)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
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 (S)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UAL)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)

ZACHARY KARABELL
River Twice Capital is short (SPY)
River Twice Capital is short (XLI)
River Twice Capital is short (XLF)
River Twice Capital is short (HAL)
River Twice Capital is short (SMH)
River Twice Capital owns (CSCO)
River Twice Capital owns (IBM)
River Twice Capital owns (MSFT)
River Twice Capital owns (GS)
River Twice Capital owns (QCOM)
River Twice Capital owns (POT)
River Twice Capital owns (CREE)

BRIAN KELLY
Accounts Managed By Kanundrum Capital own (SDS)
Accounts Managed By Kanundrum Capital own (DBA)
Accounts Managed By Kanundrum Capital own (JJG)
Accounts Managed By Kanundrum Capital own (MON)
Accounts Managed By Kanundrum Capital own (MCP)
Accounts Managed By Kanundrum Capital own (MS)
Accounts Managed By Kanundrum Capital own (QLGC)
Accounts Managed By Kanundrum Capital own (TBT)
Accounts Managed By Kanundrum Capital own (YGE)
Accounts Managed By Kanundrum Capital own The Euro
Accounts Managed By Kanundrum Capital own (VXX)
Accounts Managed By Kanundrum Capital own (VIX) calls
Accounts Managed By Kanundrum Capital are short The Yen
Accounts Managed By Kanundrum Capital are short the Austrlian Dollar

MOSHE ORENBUCH
(AXP), (MA), (COF), (DFS), (JPM), (BAC), (C), (WFC) Is Or In Past 12 Months Was A Client Of Credit Suisse
Credit Suisse Provided Investment Banking Services To (AXP), (MA), (COF), (DFS), (JPM), (BAC), (C), (WFC) In Past 12 Months, Has Received Investment Banking Compensation
Credit Suisse Provided Non-Investment Banking Services To (AXP), (COF), (DFS), (JPM), (BAC), (C), (WFC) In Past 12 Months, Has Received Non-Investment Banking Compensation
Credit Suisse Has Managed Or Co-Managed A Public Offering For (AXP), (JPM), (BAC), (C), (WFC) In Past 12 Months
Credit Suisse Expects To Receive/Seek Investment Banking Compensation From (AXP), (V), (MA), (COF), (DFS), (JPM), (BAC), (C), (WFC) In Next 3 Months
Credit Suisse Securities (USA) LLC Is Market Maker In (MA)
Credit Suisse Owned 1% Or More Of (V) As Of End Of December



CNBC.com with wires.

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NVDA
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SEA
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TXN
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SPDR MAT SEL
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YUM
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AAPL
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MCD
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MV SEMI
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