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Pro Trader: Oil Could Be Breaking Out

Tuesday, 22 Mar 2011 | 1:22 PM ET

Once again oil emerged as a key market mover with fighting in the Mideast driving crude even higher; in turn high crude drove the S&P lower.

Geo-political unrest landed in the spotlight after a US warplane crashed in Libya Tuesday as coalition forces carried out air attacks for a third night.

In addition to Libya, traders were also paying close attention to reports coming out of Syria about more protests and demonstrations, some of which were turning violent.

And they were also watching developments in Yemen where leaders have endorsed some of the anti-government protestors.

Of all the developments in the Mideast, trader Steve Cortes thinks the situation in Yemen bears watching most. “It’s crucial to shipping, and crucial to Saudi Arabia. I think there’s a decent chance that Saudi Arabia has to get involved in Yemen,” he says.

Looking at potential trades, in the wake of so much unrest, Joe Terranova thinks the path of least resistance for oil is higher, In fact he’s looking for it to go considerably higher. “It looks to me like oil could break out,” he says.

And he’s not just pegging his forecast to events in the Mideast. Terranova says a confluence of other catalysts are coming together, all of which he considers bullish for oil.

For example, China’s oil demand in February was at its second highest level, ever. Also the situation in Japan seems to be improving and the dollar appears to be moving lower, broadly. On top of all that, Terranova says seasonal factors are bullish. We’re moving into a time of year when oil climbs, historically.

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The Fast Money traders discuss what's moving the markets now and look ahead to Research in Motion's tablet release and earnings announcement later this week.

Put all these catalysts together and Terranova thinks oil could quickly spike to $110.

Brian Kelly agrees that oil will likely push higher. He’s most focused on the problems in the Mideast, which he says have the potential to continue for the long-term. “Buy some oil,” he counsels.

If you’re looking to play energy outside futures contracts, trader Patty Edwards likes playing liquid natural gas and exploration. She suggests long Southwestern Energy and Chicago Bridge & Iron.

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CALL OF THE DAY: NETFLIX

Elsewhere in the market, the Fast traders have Netflix on the radar after Credit Suisse raised the stock to ‘Outperform’ from ‘Neutral’ and increased its price target to $280 from $180.

Analyst John Blackledge cited little material impact from rival Amazon's new Prime Instant Video service as well as overseas growth potential for the bullish call.

What’s the trade?

Patty Edwards can't get behind Netflix because of its valuations. And if you're in a situation where you must choose between Netflix or Amazon, "I’d go with Amazon," she says.

Brian Kelly calls Netflix "a classic high margin high valuation business and that makes me want to be short. I’m holding puts. The Sept 200 puts."

Joe Terranova cautions investors not to expect sharp declines. "The price action doesn’t suggest to me that the stock wants to go sharply lower," he says.


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TAKE YOUR POSITION: RIM

Research in Motion also landed on the trader radar after the tech company revealed its BlackBerry PlayBook pricing strategy.

Specifically, RIM’s long-awaited tablet will go on sale in North America on April 19 at a base price of $499, matching the pricing for Apple's latest iPad.

RIM, which releases quarterly results on Thursday, said it will sell the PlayBook through retailers and wireless carriers in the United States and Canada, and Best Buy said it was already accepting pre-orders.

The Wi-Fi-enabled PlayBook will compete against the iPad and other devices. It will come in 16 gigabyte, 32 gigabyte and 64 gigabyte versions priced at $499, $599 and $699 respectively.

What’s the trade?

Get all the latest insights on RIM as well as its rivals from RBC analyst Mike Abramsky. Watch the video above!





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Trader disclosure: On Mar. 22, 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 Cortes is Long (TM). Steve Cortes is Long (GS). Steve Cortes is Long (CSX). Steve Cortes is Long (SDY). Steve Cortes is Long (EXC). Steve Cortes is Long (SO). Steve Cortes is Long Crude. Steve Cortes is Short (F). Steve Cortes is Short (C). Steve Cortes is Short (UNP). Steve Cortes is Short (DBA). Steve Cortes is Short Wheat. Steve Cortes is Short Soybeans. Steve Cortes is Short Corn. Steve Cortes is Short (CAD). Steve Cortes is Short Euro Vs. U.S. Dollar. Joseph Terranova is Long (C), (GS), (VRTS), (PNC), (USB), (JPM), (DIS), (CVI), (CNQ), (UPL), (CREE), (MS), (PBR), (BAX), (TEVA), (MCD), (RSX), (BM), (BTU), (CNX), (POT), (FCX), (XOM), (CVE) and (SU)

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Patty Edwards
Edwards is Long (AAPL) for Clients
Edwards is Long (AMZN) for Clients
Edwards is Long (BRK.b) for Clients
Edwards is Long (GIS) for Clients
Edwards is Long (MSFT) for Clients
Edwards is Long (TGT) for Clients
Edwards is Long (VZ) for Clients
Edwards is Long (CBI) for Clients
Edwards is Long (SWN) for Clients
Edwards is Long (ERF) for Clients
Edwards is Long (DRC) for Clients

Brian Kelly
Accounts Managed By Kelly are Long Oil
Accounts Managed By Kelly are Long Gold
Accounts Managed By Kelly are Long (EBAY)
Accounts Managed By Kelly are Long Silver
Accounts Managed By Kelly are Long Bonds
Accounts Managed By Kelly are Long (MCP)
Accounts Managed By Kelly are Long (LYC.AU)
Accounts Managed By Kelly are Long (TLT)
Accounts Managed By Kelly are Long (DBA)
Accounts Managed By Kelly are Long Corn
Accounts Managed By Kelly are Long Wheat
Accounts Managed By Kelly are Long Soybeans
Accounts Managed By Kelly are Long U.S. Dollar
Accounts Managed By Kelly are Short Copper
Accounts Managed By Kelly are Short (FCX)
Accounts Managed By Kelly are Short (XLF)
Accounts Managed By Kelly are Short (IXG)
Accounts Managed By Kelly are Short Yen

Mike Abramsky
RBC Capital Markets Makes a Market in the Securities of (RIMM)
RBC Dominion Securities Makes a Market in the Securities of (RIMM)



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