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Pros: Outside Reversal in Oil Sign of Breakdown?

Monday, 11 Apr 2011 | 6:31 PM ET

The Fast Money pros were closely watching the action in crude oil, which closed at the lows of the day.

Initially, the initial sell-off was linked to a possible cease-fire in Libya. However, even after rebels rejected the offer, oil continued to sink.

What should you make of it?

Instant Insights with the Fast Money traders

Joe Terranova explains that oil made what technical analysts call an outside down reversal and he considers that an important sign. Oil traded to a 30-month high and then closed below the previous day's low. “You’ve got to pay attention to that,” he says. “It’s important to understand when momentum in the market is changing,” and Terranova thinks this is a sign it is, in fact, changing. He says he got out of Canadian Natural Resources and Petrobras .

Esteemed oil trader Dennis Gartman largely agrees. “Joe is spot on,” he says. "We had an outside reversal." The technical action suggests the trade is to now be a seller of any rally in US Crude. However he cautions that US Crude has diverged from Brent . "If you're going to be a seller, sell WTI but if you're going to be a buyer buy Brent," Gartman says.

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Stephen Weiss is on the other side. “I think oil is still ok,” he says. “I think it's natural for it to take a breather." Weiss expects to see instability in the Mideast continue and, as a result, he thinks oil should trade higher.

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TECHNICALS TRYING TO TELL YOU SOMETHING

Looking at the broader market, stocks mostly fell on Monday as energy shares sold off on those lower oil prices. Also, the Street grew concerned that company outlooks may fall short of expectations as earnings season gets underway.

What should you make of it?

Fast Money traders Guy Adami and Joe Terranova were focused on some key technical levels. Guy Adami is watching 1325, the level at which the S&P closed. "It's is a level to watch," he says. "It had been support."

Joe Terranova is again looking at technicals. He cautions that if the markets ticks much lower, technical analysts could start talking about "a double top in both the S&P and the Nasdaq." That's potentially bearish. "You have to pay attention to the technicals right now," he says.

Terranova is particularly concerned by reversals in Caterpillar , Valero and Netflix . "Netflix was a stock that used to close every day on the highs and now it closes on the lows. A number of technology names are doing that right now." Again, Terranova considers that action a sign that momentum is changing.

Stephen Weiss isn't terribly concerned about technicals. He thinks earnings will be strong. And once that happens he expects fundamentals will trump the technicals.

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MARKET BUZZKILL: WHAT’S WRONG WITH TECH

Tech took it on the chin Monday with both Google and Apple closing lower.

What’s the trade?

Joe Terranova is very focused on Google’s earnings report. “I don’t think Google is trading well at all,” he says. He again expresses concern that momentum in the market may be shifting.

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GARTMAN: MORE CHINA TRADE DEFICITS AHEAD

China A Net Importer?
China's Yuan sets a new high against the dollar today. Insight with Dennis Gartman, The Gartman Letter.

Reports out of Beijing stunned the Street on Monday, with China posting a trade deficit for the first time since 2004.

The deficit was due, in large part, to the rising prices of imported commodities, a development that underscores just how quickly and sharply prices are rising.

What should you make of it?

Find out from Dennis Gartman. Watch the video now!





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Trader disclosure: On April 11, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (INTC); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Weiss is short (X); Weiss is short (RTH); Weiss is short (IWM); Weiss owns (VZ); Weiss owns (QCOM); Weiss owns (DVN); Weiss owns (COP); Weiss owns (BTU); Weiss owns (JPM); Weiss owns (MSFT); Terranova owns (JPM); Terranova owns (C); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (TCK); Terranova owns (BAX); Terranova owns (XOM); Terranova owns (AKAM); Karabell owns (AAPL); Karabell owns (BHP); Karabell owns (BIDU); Karabell is long (GOOG); Karabell owns (GS); Karabell owns (MRVL); Karabell Owns (SINA); Seymour owns (AA); Seymour owns (AAPL); Seymour owns (F); Seymour owns (INTC)

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Karabell And River Twice Capital Own (MON), (NTES)

For Willie Williams
Societe Genarale Facilitates Transactions In Tradable Currencies

For Dennis Gartman
Funds Managed by Dennis Gartman are long Canadian Dollars
Funds Managed By Dennis Gartman are long crude
Funds Managed by Dennis Gartman are long nat gas
Funds Managed by Dennis Gartman are shot 10 yr canadian bonds
Funds Managed by Dennis Gartman are shorrt 10 yr U.S. treas. Notes
Funds Managed by Dennis GArtman are short euros.

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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For Jon Najarian:
I own AA Call Spreads, no positions in DRRX, but moving in post & I am posting about it.
DRRX Primary endpoint was not met in ELADUR Phase II Study for Chronic Low Back Pain- In this study of 263 patients suffering from chronic low back pain, the primary efficacy endpoint

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Stephen Weiss SOT from 3/22/11
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