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Is the Great Big Commodity Trade Unwinding?

Tuesday, 12 Apr 2011 | 1:29 PM ET

On Tuesday chatter on the Street had everything to do with the next big move in commodities after Goldman Sachs shook oil markets. Analysts at the firm are calling for Brent crude to decline by almost $20.

Meanwhile, jitters in the space were amplified by the latest results from Alcoa, which showed revenue fell short of estimates.

Are these early signs that the great big commodity trade is unwinding? How should you position now? The Fast traders break it down.

- CRUDE SELL-OFF

In the near term, energy Joe Terranova also expects the price of crude to move lower. Among money managers, “Energy had been the overweight trade and it's now being unwound,” he says.

To support his thesis Terranova cites the technicals; earlier in the week crude made an outside down reversal. However, he also says longer term he would not allow the spot price of crude to dictate all his energy holdings. “I'm bullish on the space and remain long Exxon,” he says. “I believe in the large integrated story. And I’m a buyer of Occidental on a pullback.”

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Brian Kelly tells the desk that he doesn’t interpret the Goldman note as a bearish call, rather just a call for a correction. “I think the pullback presents an opportunity,” he says. “Around $102 I’m a buyer of US Crude,” he says.

OptionMonster Jon Najarian tells the desk he, too, is a buyer of oil, but substantially lower. “I think we overshoot to the downside. I think oil breaks below $100 – then I’m a buyer,” he says.

Trader Stephen Weiss finds the sell-off in oil positive. “An event like this is healthy,” he says. “It shakes out the speculators and we go back to fundamentals. I’d play it long Conocco Phillips.”

Word on the Street Now
The Fast Money Traders and Daniel Dicker, Independent Oil Trader, weigh in on oil trades today in light of Goldman's bearish look at the commodity.

Independent Oil trader Daniel Dicker, author of “Oil’s Endless Bid” is also bullish long-term. “I don’t think WTI drops below $101 or Brent below $115,” he says.

Dicker suggests setting target numbers and then pulling the trigger. Ahead of the broadcast he told Fast producers 3 names that belong on the radar are Chevron , ConocoPhilips and Hess . "Those are the names to look at," he says.

- ALCOA SELL-OFF

As we mentioned above, Alcoa's lighter-than-expected revenue started the earnings season on a dour note and called into question the strength of the commodities bull.

It’s worth noting that Alcoa revenue did rise 22 percent to $5.96 billion but lagged the Wall Street forecast of $6.08 billion.

What should you make of it?

Joe Terranova is cautious of Alcoa, specifically. Looking at technicals he says that Alcoa is breaking down below its 50-day. “The stock is clearly on the defensive,” he explains.

Brian Kelly is concerned about metals a little more broadly. He explains that China based steel makers cut prices on steel because China’s car market is slowing down. “You have to question how strong growth is going to be,” he says.

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TOPPING THE TAPE: RETAIL

Meanwhile the Fast traders were also watching the action in retail, with Walmart and other stores making gains Tuesday, largely on the back of falling oil.

What’s the trade?

Trader Stephen Weiss notes that the retail sector held up well, even as oil marched higher. “Now, if oil comes down I think we see retail head up more,” he says..

Jon Najarian is more focused on the credit cards. He says, “higher prices at the pump should benefit Mastercard and Visa ” if for no other reason than more people will pay with plastic rather than carry incrementally more cash in their wallets.

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CHIP WEAKNESS

The traders also have the semiconductor stocks on the radar. Host Melissa Lee notes for about a year it seems moves in the SMH have been corrrelated to moves in the S&P with the chip stocks leading the broad market.

What should you make of it?

Trader Brian Kelly reminds the desk that he’s short SMH, “because the fundamentals coming out of the companies aren’t that great. They're talking about inventories increasing.”




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Trader disclosure: On April 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova owns (JPM); Terranova owns (C); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (TCK); Terranova owns (BAX); Terranova owns (XOM); Terranova owns (AKAM); Weiss owns (COP); Weiss owns (MSFT); Weiss owns (DVN); Weiss owns (HK); Weiss owns (BTU); Weiss owns (EMC); Weiss owns (JPM); Weiss owns (FAS); Weiss owns (HBAN); Weiss is short (IWM); Weiss is short (X); Weiss owns (RTH); Weiss owns (AKS)

For Dan Dicker
Dicker Owns (COP)
Dicker Owns (XOM)
Dicker Owns (APA)
Dicker Has A Long Position In Oil Through Spreads And Options

For Aaron Kessler
ThinkEquity, LLC Is A Market Maker In (AMZN)

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 (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 (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 (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of DOMINO'S PIZZA UK & IRL
PLC

For Brian Kelly
Accounts Managed by Kanundrum Capital are long (MON)
Accounts Managed by Kanundrum Capital are long (SLV)
Accounts Managed by Kanundrum Capital are long (GLD)
Accounts Managed by Kanundrum Capital are long (EBAY)
Accounts Managed by Kanundrum Capital are long (EWP)
Accounts Managed by Kanundrum Capital are long (TSN)
Accounts Managed by Kanundrum Capital are long (VLO)
Accounts Managed by Kanundrum Capital are long VIX calls
Accounts Managed by Kanundrum Capital are long SPY puts
Accounts Managed by Kanundrum Capital are long wheat futures
Accounts Managed by Kanundrum Capital are long soy futures
Accounts Managed by Kanundrum Capital are long gold futures
Accounts Managed by Kanundrum Capital are short (SMH)
Accounts Managed by Kanundrum Capital are short (XLF)
Accounts Managed by Kanundrum Capital are short US bond futures

CNBC.com with wires.

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COP
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CVX
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HES
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MA
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OXY
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WMT
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SPDR SPRET
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MCD
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XOM
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MV SEMI
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