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Halftime: Egypt Unrest Catalyst For Traders

Stocks sold off Friday with growing unrest in Egypt triggering unrest among US investors.

Thousands of people have taken to the streets of Cairo and other major cities in Egypt calling for President Hosni Mubarak to step down, after being in power for 30-years.

After four consecutive days of protest, Friday’s demonstrations were the biggest and bloodiest. People in Egypt are fed up with unemployment, poverty, corruption and the lack of freedom under Mubarak.

Underscoring the last point, in an attempt to clamp down on the unrest, Mubarak imposed a curfew in the major cities.

Meanwhile fears that these developments could disrupt traffic in the Suez canal sent oil prices sharply higher. 1.8 million barrels went through the Suez in 2009 and a closure would result in 6,000 miles of extra transport.

What’s the trade? What must you know?

Instant Insights with the Fast Money traders

Brian Kelly thinks the trade is simple. "Long oil ," he says. And he also suggests looking at some of the tankers such as Frontline.

Steve Grasso doesn't agree. He thinks the pop in tankers was a knee jerk reaction and counters the trade is done. “What are the chances of the Suez Canal really shutting down,” he asks.

”I don’t think there’s a good chance, concedes, Kelly. “And if it does shut down I think it’s very short term. It’s not in Egypt’s best interest to shut it down. But I do think you can buy oil,” he counters. “And I don’t think FRO is overbought at all.”

”I’m seeing strong call volume in the Frontline options,” says Pete Najarian adding to Kelly's bullish case. Najarian sees options investors are making upside bets using the 27.5, 29 and 30 calls in Frontline.

Meanwhile Jared Levy, Chief Derivatives Strategist at TPG, has Apache on his radar. The stock is taking a hit because they own fields in Egypt, “but their oil fields are about 400 miles away from the Nile delta,” he says. “They have little chance of being affected. It’s a higher risk trade but I think Apache is a stock to buy here,” he says.

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VODAFONE IN EGYPT

Meanwhile, the Egyptian government ordered all mobile telephone operators to suspend services "in selected areas" of the country, Vodafone said Friday.

In a statement, the company said "under Egyptian legislation, the authorities have the right to issue such an order and we are obliged to comply with it."

Britain-based Vodafone Group is one of the largest mobile phone operator in Egypt, with more than 25 million subscribers.

What’s the trade?

Pete Najarian suggests keeping the stock on the radar. Although it’s down, “I don’t know if it’s fallen enough to be attractive,” he says, “but I’d keep my eye on it.”

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EGYPT TRIGGERS FLIGHT TO SAFETY

Looking at the markets broadly, both the Dow and S&P fell as events in Egypt sent investors running for the exits.

"It is too soon to say what the outcome of this is going to be," says Joe Battipaglia, market strategist at Stifel Nicolaus in a Reuters interview. "A breakdown in internal control in Egypt will be debilitating for North Africa, will have negative impact on energy prices, and that could be a challenge to the economy in 2011."

What should you be watching?

Pete Najarian suggests keeping an eye on the Vix . “It spiked above the 50-day, 100-day and now the level to watch is the 200-day at 23,” he says.

Steve Grasso is watching technical levels in the S&P. “If we close below 1283 – that will make for 2 losing weeks in a row,” he says. “That’s bearish."

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Trader disclosure: On Jan. 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MHY), (NDAQ), (PFE), (PRST) and (S). Pete Najarian owns (F) calls and bonds. Pete Najarian owns (V) call spreads. Pete Najarian owns (YHOO) and (YHOO) calls. Pete Najarian owns (VZ) calls. Pete Najarian owns (MS). Pete Najarian owns (JPM) call spreads. Pete Najarian owns (C). Pete Najarian owns (BAC) call spreads. Pete Najarian owns (GE). Pete Najarian owns (FRO). Pete Najarian owns (TCK).

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BRIAN KELLY
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (MON)
Accounts Managed By Kanundrum Capital Own (ATW)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Own (JJG)
Accounts Managed By Kanundrum Capital Own (YEN)
Accounts Managed By Kanundrum Capital Own (TBT)
Accounts Managed By Kanundrum Capital Own (VXX)
Accounts Managed By Kanundrum Capital Own VIX calls
Accounts Managed By Kanundrum Capital Own (YGE)
Accounts Managed By Kanundrum Capital Own (GMCR) puts
Accounts Managed By Kanundrum Capital Are Short Australian Dollar

STEVE GRASSO
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)

JARED LEVY
Accounts Managed by Jared Levy own (AAPL) put spreads
Accounts Managed by Jared Levy own (FCX) put spreads
Accounts Managed by Jared Levy own (GLD) call spreads
Accounts Managed by Jared Levy own (GS) put spreads
Accounts Managed by Jared Levy own (MOS) put spreads
Accounts Managed by Jared Levy own (MOS) call spreads
Accounts Managed by Jared Levy own (NFLX) call spreads
Accounts Managed by Jared Levy own (NFLX) put spreads
Accounts Managed by Jared Levy own (NOK) puts
Accounts Managed by Jared Levy own (NOK) calls
Accounts Managed by Jared Levy own (SBUX) put spreads
Accounts Managed by Jared Levy own (SINA) call spreads
Accounts Managed by Jared Levy own (SLV) put spreads
Accounts Managed by Jared Levy own (SPX) call spreads

DENNIS GARTMAN
Funds Managed by Dennis Gartman Are Long Gold
Funds Managed by Dennis Gartman Are Short Sterling
Funds Managed by Dennis Gartman Are Short Yen
Funds Managed by Dennis Gartman Are Short Euro
Funds Managed by Dennis Gartman Are Long Corn
Funds Managed by Dennis Gartman Are Long Aussie Dollars
Funds Managed by Dennis Gartman Are Long Nat Gas
Funds Managed by Dennis Gartman Are Long Swiss Franc

ANTHONY SCARAMUCCI
Scaramucci has no disclosures



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