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After Hours Action: IBM

On Tuesday, the Fast Money traders were poring over results from IBM after big blue beat expectations but then sold-off in the after-market.

What must you know about this earnings report?

The Dow component reported fourth quarter earnings of $3.59 a share. The tech giant earned $3.28 a share during the same period a year earlier.

Sales for the most recent quarter rose to $27.2 billion, up from $27 billion last year.

The company was seen earning $3.47 a share on revenue of $26.96 billion, according to a consensus estimate from Thomson Reuters.

IBM also said it now sees full-year 2010 earnings approaching at least $11 a share vs. a forecast of $10.89 a share.

IBM has been remarkably resilient throughout the economic crisis, boosting profits and raising its guidance at a time when many other large technology companies went in the opposite direction.

What’s the trade?

IBM is a great company but at these price levels the stock may be a tad ahead of itself, muses Guy Adami. I would love for it to pull back to $120, he adds. If it does then I'm interested again.

Fundamentally I like the name although right now the stock may be tired, agrees Tim Seymour. I'm not a buyer right now but I'd put it on the radar.

I'd put IBM on my watch list too and wait for a pullback, echoes Joe Terranova. And if you hear commentary out of IBM about recovering demand in the tech space, I'd look at Dell as well as EMC and Qualcomm as beneficiaries, he adds.

If you're looking for a long trade in this space I like Western Digital and Seagate, adds Adami.

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THE OBAMA TRADE

Health care stocks hit 52-week highs on Tuesday as investors watched a key Senate race in Massachusetts.

With early polls suggesting the Republican candidate will likely win Ted Kennedy’s seat, Pfizer , Merck and other health care giants soared higher.

If Democrats lose their 60 vote majority in the Senate, that, in turn, could call the entire health care reform bill into question.

What’s the trade?

Regardless of the outcome in Masssachusetts it wouldn't surprise me to see another run at health care reform, muses Karen Finerman. President Obama pegged his election on it. I don't think it's over.

I agree that it's not over, adds Guy Adami. I'd think about short positions in this space; perhaps look at UNH .

I wouldn't trade these stocks at all, counsels Tim Seymour. There are far too many variables and unknowns. As far as I'm concerned trading HMOs against reform is the equivalent of gambling.

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FINANCIALS REVERSE HIGHER AS EARNINGS LOOM

On Tuesday the traders were closely watching the action in bank stocks after Citigroup earnings showed a $7.6 billion quarterly loss.

Investors, however, appeared to shrug off the negative news and instead focus on the positive; Citi’s loss narrowed from the previous year and losses on consumer and corporate loans fell.

Meanwhile, the Fast Money desk is also digesting a published report which suggests Goldman Sachs will probably hit a profit plateau in 2010, just as Morgan Stanley rebounds from its worst year ever. If this thesis is correct, 2010 will be the first year in a decade that Morgan Stanley’s annual net income grows faster than Goldman Sachs, says the Bloomberg report.

Banks Earnings This Week
Wednesday: BofA, Morgan Stanley, Wells, USB
Thursday: Goldman, Fifth Third, Key Banc
Friday: BB&T

How should you be trading banks stocks, now?

I'm long BofA , reminds Karen Finerman, and I bought more on Tuesday. But I'm in this stock for the long-haul.

If you're long Citi I would hold on, counsels Joe Terranova. And I agree with Karen, I like BofA. Consumer credit trends are beginning to heal.

Wells Fargo looks like a nice short, muses Guy Adami.





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Trader disclosure: On January 19th, 2010, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (AAPL); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Owns (MCD), (MSFT), (YUM); Terranova Is Short (CMA), (ICE), (ESS), (JCI), (CAL), (AGU); Terranova Owns (QCOM), (MSFT), (DELL), (AAPL), (EMC), (FCX), (FTO), (XOM), (BAC), (JPM); Terranova Owns (POT) Feb. Puts; Terranova Owns (XHB) Mar. Puts

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