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Halftime—Pete Najarian: Heavy Upside Call Buying In This Name

The chip space remains hot, said options trader Pete Najarian on Wednesday, especially semiconductor Micron Technology .

"A lot of upside activity on a stock that's already moved up 40 percent just this year," noted Najarian, a "Fast Money" trader and co-founder of optionMONSTER.com. "Impressive to continue to see the options come into this name."

Earlier this week, options traders were buying Micron's April 15 calls. Traders are now onto the March 15 calls, Najarian said.

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TRADING CISCO AHEAD OF EARNINGS

After spooking the market for two quarters with cautious forecasts, Cisco Systems must do more than meet or modestly beat analysts' forecasts to win back investor confidence.

Investors want CEO John Chambers to show the network equipment maker is gaining stability, and fighting off rivals like Hewlett-Packard while winning orders for routers and switches despite budget cuts among public sector clients.

"I have to think the demand story for Cisco is as strong as just about everybody else in the space," Najarian said.

In the options market, Najarian said traders have taken a "bullish tone" on Cisco. Najarian said the call-to-put ratio, for example, is "outstanding." There is huge open interest, however.

The best way to gauge Cisco is through Juniper Networks , Najarian said. There is considerable upside buying in JNPR options. It started with the March 40 calls, but has progressed to the March 44 calls.

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While Najarian expects a solid growth number out of Cisco, he prefers Juniper Networks. Steve Cortes, founder of Veracruz, agreed. He, too, thinks Chambers will no longer take a bearish tone. Cortes also expects Cisco to do a better job of managing expectations.

Cisco is one of the technology sector's bellwethers because its customers are broad-based, ranging from small businesses to foreign governments. It will report results for the quarter ending in January rather than December like most of its peers, making the numbers a more current indicator of technology spending.

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POPS & DROPS

Stocks were under pressure Wednesday, led by energy, as investors took in some profits a day after the market closed at fresh 2-1/2 year highs. The "Fast Money" traders, though, found these market movers to be the most interesting:

Pops (stocks that went higher)

Polo Ralph Lauren (RL) popped 8%: The textile company's board approved a $250 million stock buyback plan and doubled its quarterly dividend as revenue for third-quarter rose by 24 percent. Joe Terranova of Virtus Investment Partners recommends staying long this stock with $115 as your stop.

The Andersons (ANDE) popped 10%: The grain marketer reported fourth-quarter revenues of $1.15 billion, far exceeding the average estimate of $1.06 billion.

When wheat goes higher, so does ANDE, said Brian Kelly of Kanundrum Capital. He continues to like this stock.

3M (MMM) popped 1%: The St. Paul, Minn.-based industrial goods giant established a new open-ended $7 billion stock buyback plan to replace its existing authorization.

Consumers staples are in right now, said Cortes. He likes 3M, especially its health care line.

Drops (stocks that went lower)

Computer Sciences (CSC) dropped 14%: The Falls Church, Va.-based tech company said third-quarter earnings rose by 15 percent on an income tax benefit. Its top line, however, missed estimates and margins declined, reports Najarian. CSC also lowered its targets for the year.

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CALL THE CLOSE

At the conclusion of Wednesday's program, the "Fast Money" traders revealed where they think the market will go and how they're trading it.

"Oil and gas are heading lower," Cortes said. "I love grocery stores."

Cortes has been a fan of SuperValu , a grocer based in Eden Prairie, Minn.

Being as Cisco's sales growth is highly correlated to global GDP growth, Terranova thinks the technology company will surprise to the upside with its earnings release on Wednesday.

Kelly is a buyer of the market.

With the S&P holding at around the 1,320 level, Najarian is watching the volatility index. It's not spiking, he said, but is on the low end. He recommends buying protection because it seems the market could go higher.

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Trader disclosure: On Feb. 9, 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 (GM). Pete Najarian owns (AXP). Pete Najarian owns (V) call spreads. Pete Najarian owns (YHOO). 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 (MU) calls. Steve Cortes owns (SWY), (K), (SVU), (MO) and (PM). Steve Cortes is short (LVS). Steve Cortes is short (XLE) vs. S&P. Steve Cortes is short Crude. Joe Terranova owns (VRTS), (C), (UPL), (GM), (PEP), (LTD), (CVI), (SU) and (CNQ). Joe Terranova owns (POT) puts.

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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 (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 (XLF)
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 (DPUKF)

BRIAN KELLY
Accounts Managed By Kanundrum Capital Own (BAC)
Accounts Managed By Kanundrum Capital Own (JEF)
Accounts Managed By Kanundrum Capital Own (MS)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Own (JJG)
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (DRYS)
Accounts Managed By Kanundrum Capital Are Long The US Dollar
Accounts Managed By Kanundrum Capital Are Short The Yen
Accounts Managed By Kanundrum Capital Are Short The Australian Dollar

CNBC.com with wires. Reuters contributed to this report.

Symbol
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CSCO
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HPQ
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JNPR
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MU
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SVU
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