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Options Activity Reveals Pocket of Strength in Weak Market?

The Dow dropped by triple digits on Wednesday as investors ran for the exits after a three-day rally.

Falling crude prices triggered concerns about energy stocks and disappointing earnigns from Disney dragged down market sentiment, broadly.

”The market feels vulnerable but it's felt vulnerable a number of times,” says Fast trader Guy Adami. Largely Adami and the other traders aren't terribly concerned by Wednesday's sell-off; they expect a bounce. "On the dip you can buy," says Pete Najarian. "I'm with Pete," echoes Joe Terranova.

And in an environment like this, the Fast Money traders always suggest looking for pockets of strength and putting money to work.

One such area may be technology - unusual activity in the options market, leads Pete Najarian to speculate that big money may expect to see outperformance in select areas of this sector.

Specifically, he’s been watching the action in Rovi , which has experienced an usually high volume of call buying since Monday. “The May 50 calls have been on fire,” he says.

Considering Rovi is a graphics software company, he suggests watching the software and chip stocks.

Looking at another area of tech, options investors are rather unenthusiastic about Cisco . According to Jon Najarian, “Cisco options imply a 5% move on earnings.”

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In other words options investors don’t expect to see Cisco break out of its range. “Cisco is not going to light up anything either negatively or positively,” Najarian says.

However, in the space Joe Terranova and Guy Adami both suggest looking at Cisco's rival --Juniper. “It’s taking market share from Cisco,” they say. “Look at it on the pullback."

Adami also thinks the pullback in IBM presents an opportunity.

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TOPPING THE TAPE: MACY’S

Elsewhere in the market, the Fast Money traders were taking a hard look at retail after Macy's posted record earnings and doubled its dividend.

What’s the trade?

Karen Finerman remains bullish Macy’s, despite the recent gains in the stock. "They crushed on every metric," she says. "And even though the stock is up, I still think it’s not expensive. The story is very much intact."

In retail, Guy Adami says "the place to be is Abercrombie."

Joe Terranova likes BJ's. "I expect commodity costs remain high. BJs works."




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Trader disclosure: On May 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; Pete Najarian owns (PFE); Pete Najarian owns (MRK); Pete Najarian owns (AAPL); Pete Najarian owns (TCK); Pete Najarian owns (AKAM); Pete Najarian owns (C); Pete Najarian owns (HPQ); Pete Najarian owns (TEVA); Pete Najarian owns (MS); Pete Najarian owns (RSX); Pete Najarian owns (GE); Pete Najarian owns (MSFT); Pete Najarian owns (YHOO); Pete Najarian owns (VLO); Pete Najarian owns (TER); Pete Najarian is long (RIMM) calls; Pete Najarian is long (AVL) calls; Pete Najarian is long (NTAP) calls; Pete Najarian is long (XLF) calls; Pete Najarian is long (PMCS) calls; Pete Najarian is long (CVS) calls; Pete Najarian is long (XL) calls; Pete Najarian is long (BSX) calls; Pete Najarian is long (HBC) calls; Pete Najarian is long (EWZ) calls; Pete Najarian is long (XLI) calls; Pete Najarian is long (FCX) calls; Finerman and Finerman's firm own (AAPL); Finerman and Finerman's firm own (BP); Finerman owns (C); Finreman and Finerman's firm own (CVS); Finerman's firm owns (IBM); Finerman's firm owns (JPM) and is long (JPM) leaps; Finerman owns (JPM); Finerman and Finerman's firm own (MSFT); Finerman's firm owns (TGT); Finerman owns (UNG); Finerman owns (USO); Finerman's firm is short (IWM), (SPY), (MDY); Finerman's firm owns s&p puts; Finerman's firm owns Russel 200 puts; Terranova owns (XOM); Terranova owns (BAX); Terranova owns (SLV); Terranova owns (TCK); Terranova owns (APA); Terranova owns (HOC); Terranova owns (OXY); Terranova owns (UPL); Terranova owns (FCX); Terranova owns (BX); Terranova owns (V); Terranova owns (VRTS); Terranova owns (JPM); Terranova is short (NFLX); Terranova is short S&P Futures; Terranova is Chief Market Strategist of Virtus Investment Partners, LTD; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU)

For Joe Terranova
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 (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 DOMINO'S PIZZA UK & URL PLC
Virtus Investment Partners Owns More Than 1% Of (DRYS)



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