Halftime Report: Apple And Other Top Tech Trades

Both the Dow and S&P 500 shot higher on Monday with gains fueled by growing optimism that this earnings season will be strong.

Better-than-expected earnings from Gannett buoyed the sentiment of investors looking for confirmation the economy is stabilizing.

Adding to the positive tailwind, BofA-Merrill raised its price target for Caterpillar to $65 from $52 citing a faster recovery in machinery revenue next year. Caterpillar is set to report results on Tuesday.

"It's all about earnings, and it's all about momentum," muses Bruce Bittles, chief investment strategist at Robert W. Baird. "Investor optimism is really rising rapidly now for the first time since the March lows, and I think a lot of money is bursting off the sidelines as a result."

The Fast Money traders are keeping a close eye on the string of tech earnings reports due this week, with Apple kicking things off  Monday after the bell. Considering Yahoo!, eBay and Amazon are also scheduled to report later in the week, how should you game the space?

Tech Earnings This Week

Monday: Apple, Texas Instruments
Tuesday: Yahoo!, Seagate Technology
Wednesday: eBay
Thursday: Amazon, Netflix, AT&T
Friday: Microsoft

Instant Insights with the Fast Money traders?

I expect to see Apple beat, says Eugene Profit of Profit Funds, but I also think there are high expectations for this stock. And usually Apple isn’t overly optimistic with guidance. So I think there could be a small sell-off and on that pullback, I’d be a buyer.

Options activity suggests not to expect big moves in Apple stock on earnings, reveals Mike Khouw of Cantor Fitzgerald.

The charts of IBM are very revealing for tech going forward, explains Katie Stockton of MKM. IBM charts suggested strong positive expectations were very much built in and despite strong results the stock sold-off. I think technology names reporting this week may behave in the same way.

Although Texas Instruments is reporting later today, if you’re looking for a chip trade I’d look at Intel over TXN, adds Eugene Profit.

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GOLDMAN REVERSING TO UPSIDE

Shares of Goldman Sachs turned higher midday with bullish momentum driving the sector broadly. What’s the bank trade?

What’s the trade?

Goldman is a name that sold-off recently, reminds Mike Khouw. Monday’s action says investors may be a little more comfortable with the market at these levels.

The financial sector has outperformed since the March low, reminds Katie Stockton. I think financials as well as technology are now overextended. I expect to see a rotation out of high beta areas such as financials and into more defensive areas such as staples and telecom.

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OIL HITS NEW ’09 HIGH

U.S. crude oil futures see-sawed in choppy trading on Monday, reacting both to technical resistance around $79 as well as economic optimism and the weak dollar.

What’s the oil trade?

Options activity suggests to me that investors are mostly bullish, reveals Mike Khouw.

Last week crude oil broke above resistance at around $76.50, says Katie Stockton. If that breakout is confirmed on a close it would suggest the path is clear of resistance and the next level would be mid $80’s. In other words $84 may be the next stop for oil.

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COMMODITIES AND INDUSTRIALS PUSH HIGHER AS DOLLAR WEAKENS

The dollar hovered near a 14-month low against the euro on Monday as investors bet the Federal Reserve will hold U.S. interest rates near zero well into next year.

The euro traded within half a cent of $1.50, a level not seen since August 2008. Analysts said investors would be on alert for any comments about excessive euro strength from a meeting of euro zone finance ministers later in the day.

Though the U.S. economy is expected to have exited recession in the third quarter, investors fear rising unemployment will keep the Fed from lifting interest rates quickly. That would diminish the dollar's appeal and encourage investors to buy higher-yielding, higher-risk currencies and assets instead.

"The trend clearly is for a weaker dollar due to a lack of interest rate support," saysMarcus Hettinger, global currency strategist at Credit Suisse.

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FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE

BUY TXN? Texas Instruments reports earnings after the bell; should you buy?

No, I think there will be a better entry point, counsels Mike Khouw.

BUY KO? Coca-Cola reports ahead of the bell tomorrow, should you buy?

This stock is near reisistance so I’d wait for the earnings catalyst to get out of the way, says Katie Stockton.

BUY BSX? Boston Scientific reports earnings after the bell, should you buy? 

No, in the space I like Abbott Labs a lot better, counsels Eugene Profit.

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CALL THE CLOSE

Mike Khouw: If you want to make directional bets I’d be more inclined to do it by selling options than buying them.

Katie Stockton: I’m a buyer but I expect the S&P to pullback from 1100 so I’d wait until later in the week.

Eugene Profit: I’m a buyer.

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Trader disclosure: On October 19, 2009, 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), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Finerman Owns (AAPL); Finerman's Firm And Finerman Own (RIG), (PDE); Finerman's Firm Owns (MSFT), (NOK), (TJX); Finerman's Firm Owns (BAC) Preferred, (BAC) Call Spread, (BAC); Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (BBT) Puts; Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm And Finerman Own (WMT); Finerman's Firm Owns (BKS) Puts; Finerman's Firm Is Short (USO), (IJR), (MDY), (SPY), (IWM), (UNG); Najarian Owns (GE) Calls; Najarian Owns (HGSI) Call Spread; Najarian Owns (POT) Call Spread; Najarian Owns (RIMM) Call Spread; Najarian Owns (STX) Call Spread; Najarian Owns (WFT) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (YHOO), Is Short (YHOO) Calls; Najarian Owns (TEX) Call Spread; Terranova Owns (HES), (HOC), (SUN)

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