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Favorable Moves Convince Najarian Bros to Buy Banks

For quite some time, money pros have been saying the day will come to get back into financials. According to the Fast traders, it’s today.

“I like the way the financials are trading,” says trader Jon Najarian. It’s been quite a while since the Option Monster said something like that.

To support his thesis, he points to the gap higher in Goldman Sachs. “Goldman was 91 when we closed out the year.”

Although Goldman pared some gains, Najarian thinks that’s simple profit taking. “It’s down but it’s not a bearish give back. As you can see from the chart, "that was a meaningful move to the upside.”

And it’s not just Goldman where both Jon and his brother Pete Najarian have spotted bullish signs.

“I’m watching the strong interest in Jan 36 JPMorgan calls,” says Pete. “Someone sure thinks that stock is pushing higher. I just added to my JPM position,” he says in part due to that call activity. "And I'm seeing strong buying in the BofA April 7 calls."

Jon Najarian thinks the upside bets are being generated by signs that the housing market may have finally bottomed out. (On Wednesday Goldman's Jan Hatzius told us he belived housing would bottom in 2012. Back in November Najarian said much the same; he told us to watch early signs of a housing recovery.

Both Najarian's believe even a relatively modest improvement in the housing market will trigger a bank rally with the Street expecting an increase in loan demand. “That’s good for banks like JPM and BofA," explains Jon.

Trader Brian Kelly agrees. But he’d rather play the thesis long the KRE – the ETF that tracks US regional banks. “My concern with big banks is that they have investment banking arms,” he says.

How long should you stay with the trade?

For a ‘tell’ both Najarian's suggest watching action in the XLF. It broke above 12.85, the 50-day, and now it looks like it wants to challenge 14 – the 200-day.” How it behaves at that level should inform you.

Only trader Zach Karabell is negative on banks. “Though I respect that there’s a trade to be made – I still think banks face a tough road ahead,” he says.

Instead he thinks the better play is to stick with what’s working. “Industrials, tech and consumer specialty names – those are the places I like,” he says.

What do you think? We want to know!

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Trader disclosure: On Jan 4, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; P. Najarian is long AAPL; P. Najarian is long C; P. Najarian is long JPM calls; P. Najarian is long WFC calls; P. Najarian is long MSFT; P. Najarian is long INTC; P. Najarian is long YHOO; P. Najarian is long MOS; J. Najarian is long call spreads AAPL; J. Najarian is long call spreads AKS; J. Najarian is long call spreads PNC; J. Najarian is long call spreads GS; J. Najarian is long call spreads CSCO; J. Najarian is long call spreads LULU; J. Najarian is long call spreads TIVO; J. Najarian is long call spreads TIMM

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