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Gaming Goldman Into Earnings

Investors are eager to hear from Goldman Sachs Tuesday after the bell. Guy Adami's favorite best of breed bank is widely expected to show a profit of $2.2 billion, their best year since 2007.

And they may well deserve the moniker, best of breed. Goldman has managed to sidestep the worst of the financial crisis, posting just one quarterly loss since the middle of 2007, while most of its competitors reported huge losses and took massive asset-writedowns.

And lately it seems the prospects for Goldman have grown brighter and brighter. On Monday, the firm received what might be considered Wall Street’s version of the Good Housekeeping seal of approval.

Widely followed analyst Meredith Whitney upgraded the stock to 'buy' from 'neutral,' saying the company would be a key competitor in the government, corporate and municipal debt markets.

Shares climbed even higher after Whitney appeared on CNBC and offered additional insights into why she had upgraded the bank just one day ahead of earnings.

But you don’t have to take Whitney’s word for it. Last week, Banc of America-Merrill Lynch analysts upgraded Goldman to "buy" and raised their second-quarter earnings estimates saying the Wall Street bank, helped by strong trading conditions in the quarter, could blow-out estimates.

Considering all these bullish expectations and a share prices that’s up 68% ytd, how should you game Goldman?

I expect Goldman is going to perform well through the rest of the year, says Christopher Whalen, Institutional Risk Analytics Managing Director. As long as the market remains stable Goldman should harvest the benefits.

And on Fast Money’s Halftime Report the traders offered the following insights:

Meredith Whitney’s call was not a “wow this stock is doing great” -- it was more “the tallest midget is golden,” said Zach Karabell of RiverTwice. If you’re a trader it’s an opportunity but if you’re a long term investors it’s hard to get into banks because it’s hard to know what’s going on.

I wouldn’t call Goldman a midget, counters Mike Khuow of Cantor Fitzgerald. It’s not only Meredith Whitney who’s forecasting Goldman to report extraordinary trading revenue. But on the other hand I don’t know Goldman is a good bellwether for the entire banking sector either.

I’m long into Meredith Whitney’s call, reveals OptionMoster Jon Najarian. But I’m planning to take profits. However, I am seeing strong call activity that suggests the stock could pop as much as 10% in the after hours.



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Trader disclosure: On July 13th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (GE) Calls; Najarian Owns (GS) Call Spread; Najarian Owns (INTC) Call Spread; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (MFE) Calls; Najarian Owns (MS) Call Spread; Najarian Owns (NVLS) And Is Short (NVLS) Calls; Najarian Owns (XLF) Call Spread; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (MSFT); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Is Short (BAC), Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares; Finerman's Firm Owns (YUM); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (IYR), (USO); Seymour Owns (AAPL), (BAC), (EEM), (FXI); Adami Owns (AGU), (C), (GS), (MSFT), (INTC), (NUE), (BTU); Finerman's Firm Owns (HPQ); Najarian Owns (JNJ) Calls; Finerman's Firm And Finerman Own (PDE); Najarian Owns (V) And Is Short (V) Calls

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Jon Najarian Is Long GS; Jon Najarian Is Long MS; Jon Najarian Is Long JPM; Jon Najarian Is Long INTC; Mike Khouw's Firm Is Long JNJ and Short JNJ Options; Mike Khouw's Firm is Short GS and Long Gs Options