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Pros: Gold, Other Metals to Make Parabolic Move?

It seems the only thing investors can feel certain about is – uncertainty.

Optimism about financials faded on Tuesday after the Federal Reserve rejected a plan submitted by Bank of America to increase its dividend.

Meanwhile, chatter suggested housing could go into a double dip after new home sales fell in February to a record low and prices hit their lowest since December 2003.

And violence in the Mideast shows little sign of stopping. Coalition forces carried out a fourth night of air strikes to protect civilians in Libya – and Yemen declared a state of emergency following violent street protests.

With so many negative catalysts looming over the market, the Fast Money traders were focused on what’s working. And that was the XLB.

Materials was among the best performing S&P sectors Wednesday largely because of the red hot metals trade. Precious metals, in particular were off to the races with silver make another record high, and gold also advancing sharply.

What’s the trade? How should you position now?

Instant Insights with the Fast Money traders

Brian Kelly thinks the trade is quite clear. “Buy gold and silver right here,” he says.

Kelly likes gold partly due to word that demand from China could match demand from India. If you take that kind of supply / demand dynamic and combine it with the safe-haven appeal of precious metals Kelly thinks 'we have the recipe for a potentially parabolic move in these metals right now.'

Rich Ilczyszyn, Lind-Waldock Sr. Market Strategist seems to agree. Looking at silver he calls gains “an old fashioned breakout.” Ilczyszyn thinks silver may be heading to just below $40.

To confirm his thesis Ilczyszyn recommends watching the action in gold and oil. “If gold closes above $1445 and oil to trade to its highs. That will give me extra conviction,” he says.

Steve Grasso suggests that Ilczyszyn’s price target may be conservative. “When the Silver Wheaton CEO was on (Fast Money) he told us that he wouldn’t hedge unless silver hit $50. If $50 is a pipedream, that suggests he thinks it could get to $40- $45,” says Grasso.

Patty Edwards is bullish metals as well. When asked if she had to commit fresh capital to the trade she says to go, “long silver, long gold and long platinum.”

Turning attention to copper Ilczyszyn explains the metal is now trading just above the 50-day moving average. "The feel is risk on," he says. If it trades above $4.5, he's a buyer."

JJ Kinahan recommends keeping an eye on another metal, aluminum. “Alcoa was among the strongest Dow components on bets that it will benefit from metals going up,” he says

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OIL MARCHES HIGHER

Aside from the metals, another commodity was front and center on the trader radar – oil .

Oil rose on Wednesday as gasoline inventories fell more than expected and Mideast unrest showed no signs of abating.

How should you position?

Trader Steve Grasso reveals that one of his clients was buying Baker Hughes and Halliburton and selling Schlumberger and Weatherford. “He’s looking for more North American exposure versus international,” Grasso explains.

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WARNINGS SEASON: CREE

It's warnings season and the traders are poring over the lower outlooks released by a number of companies on Wednesday.

Cree took one of the biggest hits after saying revenue would be $215 to $220 million versus a prior estimate of $245 to $265.

What’s the take away?

Brian Kelly doesn’t like what he sees. “Cree doesn’t surprise me,” he says, “but when you put it together with outlooks from Adobe and Finisar , it suggests earnings estimates are going to come down in this space and possibly across the entire S&P 500.”

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UNUSUAL ACTIVITY: GENERAL MILLS

JJ Kinahan has spotted unusual options action in General Mills.

A big buyer of the July 36 General Mills calls suggests to Kinahan that somebody believes in General Mills for the next quarter. "It’s an implied bet that they can pass along input costs and improve margins," he says.


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Trader disclosure: On Mar. 23, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; JJ Kinahan is Long (AA), (C), (F), (CCJ), (GE), (MSFT), (WAG), (TBT) and (MOS). JJ Kinahan is short (XHB) and (SPY).

BRIAN KELLY
Accounts Managed By Kelly Are Long (GLD)
Accounts Managed By Kelly Are Long (SLV)
Accounts Managed By Kelly Are Long (EBAY)
Accounts Managed By Kelly Are Long (PGH)
Accounts Managed By Kelly Are Long (VLO)
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 (NFLX) Puts
Accounts Managed By Kelly Are Short (XLF)
Accounts Managed By Kelly Are Short (IXG)
Accounts Managed By Kelly Are Short Copper
Accounts Managed By Kelly Are Short (FCX)
Accounts Managed By Kelly Are Short (CRM)
Accounts Managed By Kelly Are Short (IBM)

PATTY EDWARDS
Edwards is Long (AAPL) for clients
Edwards is Long (AMZN) for clients
Edwards is Long (CCL) for clients
Edwards is Long (GIS) for clients
Edwards is Long (ORCL) for clients
Edwards is Long (MSFT) for clients
Edwards is Long (VZ) for clients
Edwards is Long (AZO) for clients

STEVEN GRASSO
Stuart Frankel & Co and it’s partners own (CSCO)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MSFT)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners own (UAL)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners are Short (QQQQ)
Stuart Frankel & Co and it’s partners are Short (AAPL)

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