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S&P Bounce: Key Intra-Day Reversal, or Shorts Taking Profits?

Wednesday, 3 Aug 2011 | 6:50 PM ET

On Wednesday market pros were talking about the resilient action in the S&P 500, which closed in positive territory, snapping a seven-day losing streak.

The moves were impressive with the S&P first dipping to a new low for 2011 mid-session, only to claw back more than 20 points and ultimately close in the green.

Did the S&P just make a key reversal or were the late gains simply short covering - as bears took profits on their bets lower?

What should you make of it? How should you position?

Trader Tactics with the Fast Money gang

Trader Joe Terranova thinks the reversal was meaningful and thinks the trade is now long. As a point of reference he's using 1227 the high point of November 2010. “What was once resistance becomes support and that was resistance throughout December 2010,” he says. Terranova now thinks it should be support and suggests playing stocks for a bounce – using 1227 as a stop.

Karen Finerman also finds Wednesday’s market action constructive. “When the market is down a lot and bounces – that’s good price action,” she says.

Word on the Street
Tech stocks fueled the market's session today but is tech still the winning trade? Also, a play on gold, oil, copper and steel with the Fast Money traders.

Finerman tells the desk she added to her position in Cummins and CAT. Looking at the latter, she says CAT is down 16% in only a week – "I don’t think it’s changed in value fundamentally by 16%. Could it trade lower? It could,” she says, “but here the valuation starts to become compelling.”

That’s not to say she would jump in with both feet – she wouldn’t “But am I starting to add to my longs? Yes!” she says.

Tim Seymour shares Finerman’s and Terranova’s outlook. “It feels like capitulation,” he says.

Trader Guy Adami also thinks the next big move is to the upside. “The bounce should feed off itself,” he says. Adami believes the market has effectively made a double bottom off the March lows. “I’d trade high beta names against 1256 as my stop,” he says. It's worth noting that Adami is making a trading call not a long term investor call.

Steve Grasso is on the other side of the trade, completely. He thinks the rally was all about short covering. “It wasn’t great support in the market, it was people locking in profits on the short side,” he says. Grasso says “I would not buy this market, I would sell the rally up to 1300 – I don’t think anything has changed.”

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TECH TOPPING THE TAPE

The real strength in Wednesday’s reversal came from tech with Apple, Google and Yahoo! all gaining.

How should you play it?

Joe Terranova is bullish on Oracle , Aruba Networks and Teradyne.

Guy Adami suggests long Juniper as a flier with a stop against the stock's 52-week low. "I think that’s your bogie. I’d go long against that level."


Tim Seymour can't get on board. He worries that high growth names like those mentioned above may be facing serious challenges. "I wouldn’t go in with both feet," he says.


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GOLD PRICE TARGET RAISED AT UBS

Much like the energizer bunny, it appears gold just keeps going and going. On Wednesday UBS raised its 12-month target to $1800 an ounce.

How should you play it?

"Although I’d continue to hold gold," says Tim Seymour, "I’d play the gold miners."

Guy Adami thinks long gold is probably the better investment but long silver is probably better trade.

Karen Finerman wouldn't play it at all. "I wouldn’t be long and I wouldn’t be short gold," she says.

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IS IT TIME TO SHORT OIL/COPPER AS MACRO WORRIES SPREAD?

On Wednesday the pros were attempting to get a handle on the next big move in oil and copper. Shouldn’t those commodities see larger corrections if the economic backdrop is deteriorating?

Find out from independent oil trader Dan Dicker, author of Oil’s Endless Bid. Watch the video now!

Analyze This: Oil & Copper
Is it time to short oil and copper as macro worries spread? Independent trader Dan Dicker has the call.






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Trader disclosure: On Aug 3, 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); Terranova owns (VRTS); Terranova owns (IBM); Terranova owns (FCX); Terranova owns (CVI); Terranova owns (AAPL); Terranova owns (GS); Terranova owns (BX); Terranova owns (XOM); Steve Grasso owns (AMD); Steve Grasso owns (ASTM); Steve Grasso owns (BA); Steve Grasso owns (BAC); Steve Grasso owns (C); Steve Grasso owns (D); Steve Grasso owns (JPM); Steve Grasso owns (LIT); Steve Grasso owns (LPX); Steve Grasso owns (LVS); Steve Grasso owns (MAR); Steve Grasso owns (MHY); Steve Grasso owns (NDAQ); Steve Grasso owns (PFE); Steve Grasso owns (PRST); Steve Grasso owns (UAL); Steve Grasso owns (XHB); Steve Grasso owns (XLB); Steve Grasso owns (XLI); Seymour owns (AAPL); Seymour owns (BAC); Seymour is short (FCX) ; Finerman owns (AAPL); Finerman owns (BAC); Finerman owns (JPM)

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 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

For Steve Grasso
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (MET)
Stuart Frankel & Co and its partners own (MU)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UAL)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners are short (QQQQ)

Tim Freeman
**No disclosures

Ward McCarthy
**No disclosures

For Karen Finerman
Finerman’s firm owns (AAPL)
Finerman’s firm owns (BAC) leaps
Finerman’s firm owns (JPM) stock and (JPM) leaps
Finerman’s firm owns (CLX)
Finerman's Firm Is Short (IWM)
Finerman's Firm Is Short (MDY)
Finerman's Firm Is Short (SPY)
Finerman's Firm Is Long S&P 500 Puts
Finerman's Firm Is Long Russell 2000 Puts


CNBC.com and wires

  Price   Change %Change
S&P 500
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ARUN
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CAT
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CMI
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JNPR
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ORCL
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TER
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SPDR TEC SEL
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YHOO
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AAPL
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GOOGL
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  • Najarian, the "Pit Boss," is cofounder of optionMONSTER.com, a news site for options traders.

  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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