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Update: Egypt Unrest Catalyst For Traders

The S&P suffered its biggest one-day loss in more than five months Friday after rioting in Egypt prompted stock market investors to run for the exits.

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.

Joe Terranova couldn't agree more. In 2011, "I’d either be long oil or flat oil," he says. "Not short."

Tim Seymour is bullish oil too. "Combine the potential of disruption with improving demand fundamentals and I think oil stays at these levels," he says.

Looking at some of the downstream trades, Joe Terranova thinks the unrest in Egypt is bullish for Canada's oil sands. "Look at Cenovus Energy, Suncor, and Cequence Energy," he says.

Guy Adami thinks refiners are in play. "I'd look at Valero. At $25 it looks reasonable."
Brian Kelly suggests looking at some of the tankers such as Frontline. "I wouldn't buy here, but maybe on a pullback if problems in Egypt continue," he says.

”I’m seeing strong call volume in the Frontline options,” says Pete Najarian adding to Kelly's bullish case. Najarian sees options investors 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.

Tim Seymour is looking at the sell-off in Israel on the Egypt news. He's a buyer of weakness in Teva.

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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. "The close below 1283 makes for 2 losing weeks in a row. That’s bearish."

Guy Adami agrees. He, too, is concerned that the market may be on the brink of something serious . He says, "we saw a major reversal in the S&P. We had an outside week."



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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; Seymour owns (AAPL); Seymour owns (BA); Seymour owns (F); Seymour owns (FXI); Seymour owns (GE); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK)l Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (GM); Terranova Owns (PEP); Terranova Owns (TLT); Terranova Owns (MS); Terranova Owns (POT); Terranova Owns (LTD); Terranova Owns (SU); Terranova Owns (CVI); Terranova Owns (CVE); Terranova Owns (CPX); Terranova Owns (CNQ); Jon Najarian owns (MEE), is short (MEE) calls; Jon Najarian owns (ACI), is short (ACI) calls; Jon Najarian owns (ANR), is short (ANR) calls; Jon Najarian owns (SVVS), is short (SVVS) calls; Jon Najarian owns (EQIX), is short (EQIX) calls; Jon Najarian owns (GS), is short (GS) calls; Jon Najarian owns (WMT), is short (WMT) calls


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)

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

For Dennis Gartman SOT 1/28/2011
Funds Managed by Dennis Gartman Were Long Gold during 1/28/11 FMHR

For Doug Kass
Kass has no disclosures on Gold or (NFLX)

For John Stephenson
First Asset Investment Management Owns (AGU), (POT), (CF), Soybean Futures, Corn Futures
Stephenson Owns (AGU), (POT), (CF), Soybean Futures, Corn Futures

For Gordon Johnson
Johnson has no disclosures

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