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Apple Vs Semis: Who's Telling the True Tech Story? 

On Tuesday investors stayed in wait and see mode - avoiding big bets on the S&P with concerns about Europe lingering.

However, the Fast Money traders say one sector of the S&P deserves a lot of attention - technology with the divergence between Apple and the Soxx confounding many pros.

What should you make of it?

Apple

Catalyst: Bulls cheered for Apple after UBS suggested the tech titan may be looking to push into the HDTV market and launch its own Genius Squad as part of the company’s future plans; they said the moves could generate as much as an additional $100 billion in market cap.

How should you trade it?

Trader Joe Terranova is bullish on Apple and expects it to trade to $400 by the end of the year. Although he thinks near-term catalysts include the iPhone 5 and iPad, he finds the potential of an Apple HDTV very appealing. He also thinks there's a rotation in the market and that money is coming out of fixed income and going into growth areas such as tech. (In other words, Apple is telling the true tech story.)

Trader Jon Najarian also likes the stock, but not right here. He says wait for a pullback. Najarian is concerned that sales could slump in August as the Apple faithful wait for the new iPhone 5 to roll out in September. Also he worries that each blip in the market could cause good stocks like Apple to react negatively. "Don’t chase it, here, "he says, "buy on the pullback."

Trader Steve Cortes is much more skeptical. “The analyst community is unanimous in its praise and that makes me suspicious,” says the Fast contrarian.

But that’s not the only reason for skepticism.

Cortes says if you look at Apple versus the Soxx you can see they had been trading in tandem but recently diverged.

“I think that’s problematic for tech in general and Apple specifically,” Cortes says. He takes the action as a sign of a lack of fundamental demand. As a result, he thinks Apple is a short. (In other words, semis are telling the true tech story.)

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Chip Stocks

Catalyst: Taking a closer look at chips, the semiconductor ETF dropped on Tuesday after chip maker Novellus spooked investors with a weaker than expected outlook. CEO Richard Hill said he was cautious and uncertain about the next quarter and took down estimates.

How should you trade it?

JJ Kinahan has spotted put buying in semis. And the outlook makes him nervous about Verizon. If Novellus is a sign of weakness in the economy – he thinks Verizon could have downside.

As we mentioned above, trader Steve Cortes is very focused on the downturn in the Soxx, which occurred on a benign tape. “I think that’s problematic for tech in general.” Cortes thinks it’s a sign of lack of fundamental demand.

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Cisco

Catalyst: Published reports suggested Cisco could slash as many as 10,000 jobs with as many as half of those job cuts happening in August. The potential workforce reduction triggered gains in the stock.

How should you trade it?

Trader Jon Najarian tells the desk he’s seeing bullish upside call buying in Cisco. I’m not saying the absolute bottom is in, but 3 months from now people are betting the stock trades above $20.

Trader JJ Kinahan likes the risk / reward. He says, “the reward of shares going to $20 outweighs the risk of Cisco dropping to $13."

Trader Joe Terranova is less enthused. “For a trade you could buy Cisco, but its not a growth stock anymore,” he says. If you’re a long-term investor Terranova likes Juniper much more.

Trader Cortes wouldn’t touch Cisco. He thinks Cisco is facing massive headwinds. “The biggest hurdle is state and municipal spending – that’s so important to Cisco – and we’re seeing a real move to austerity – bad for this stock.”

Although he calls the job cuts a step in the right direction, Gleacher analyst Brian Marshall tells us he thinks Cisco remains a value trap. He still has a ‘Neutral’ rating on the stock and says his 3 top ideas for the second half of the year are Apple, Juniper and F5.



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Trader disclosure: On July 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 (XOM); Terranova owns (HAS); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (CAT); Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (F); Terranova owns (CVI); Terranova owns (IBM); Terranova owns (FCX); Cortes owns (GS); Cortes owns (EXC); Cortes owns (SVU); Cortes is short crude; Cortes is short Silver; Cortes is short Copper; Cortes is short Copper; Cortes is short (LULU); Cortes is short the S&P; Cortes is short Australian Dollar; Jon Najarian is long (CSCO) call spreads; Jon Najarian is long (EUO) call spreads; Jon Najarian is long (GFI) call spreads; Jon Najarian is long (GT) call spreads; Jon Najarian is long (TSL) put spreads

For Joe Terranova:
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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 Building Materials Holdings
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 (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LHO)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (RLI)
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 (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 & IRL PLC





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