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As Banks Shares Achieve Milestone, Pro Trader Runs for Cover

Shares of U.S. financials have been off to the races in 2012 and now there's another sign that suggests to bulls that sentiment towards the big banks could be shifting on the Street.

For the first time since July of last year, the financial ETF is trading above average book value of the banks it tracks.

And it’s exactly that kinds of bullish action that has sent trader Brian Kelly to the sidelines. You read that right, the sidelines. He's sold out of almost all of his financial positions.

“I don’t think the XLF falls apart, but it’s up 20% from the November lows,” he says. “How much more does it have left? 5-10% maybe? If it goes higher, it goes without me.”

Kelly thesis has everything to do with developments in Greece. “The market is anticipating relatively positive news from Greece,” he says. “That’s already priced into bank stocks.”

If the positive scenario plays out, Kelly thinks the market will simply be looking at a situation of buy the rumor and sell the news. That is, as Greece hammers out its debt issues, investors will take profits.

And if the market does not get good news from Greece, in that case, Kelly thinks investors will run for the sidelines – especially in banks.

Either way, Kelly thinks the path of least resistance is lower. "It's time to lock in profits, if you have them," Kelly says. "A lot of stuff has been priced in."

Trader Pete Najarian doesn’t agree.

Looking at recent activity in the options market, he thinks institutional investors remain bullish on Bank of America. “I’m seeing massive buying in 8, 9 and even stretching up to 10 calls all the way to April,” he says.

That kind of activity woud suggest insitutional investors believe Bank of America, a component of the XLF, has substantially more upside by the third week of April.

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Trader disclosure: On Feb 6, 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 BAC calls; P. Najarian is long C; P. Najarian is long JPM calls; P. Najarian is long MS; P. Najarian is long YHOO; Grasso is long AVAV; Grasso is long ASTM; Grasso is long BA; Grasso is long D; Grasso is long LIT; Grasso is long MHY; Grasso is long MO; Grasso is long PFE; Grasso is long PRST; Grasso is long S; Grasso is long XLU; Najarian is long FIO; Najarian is long MOTR; Brown is long AAPL; Brown is long JPM; Brown is long COP; Brown is long BRK.B

For Steve Grasso
Stuart Frankel & its partners own CSCO
Stuart Frankel & its partners own CUBA
Stuart Frankel & its partners own GERN
Stuart Frankel & its partners own HPQ
Stuart Frankel & its partners own HSPO
Stuart Frankel & its partners own MU
Stuart Frankel & its partners own NYX
Stuart Frankel & its partners own PRST
Stuart Frankel & its partners own XRX
Stuart Frankel & its partners own ZNGA

For Brian Kelly
Shelter Harbor Capital is long SPY calls
Shelter Harbor Capital is long TLT
Shelter Harbor Capital is long US treasuries

For John Blackledge
The subject company (NFLX) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (NFLX) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (NFLX) within the next 3 months.
As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company (NFLX).

For David Flynn
No disclosures

For Michael Harris
Campbell is long the March 2012 S&P 500 futures contract

For Stephen Anderson
No disclosures

For Dan Dicker
Dicker is long GLEN
Dicker is long Oil
Dicker is short HFC

For Jagadish Iyer
Piper Jaffray usually provides bids and offers for the securities of Corning Incorporated and will, from time to time, buy and sell Corning Incorporated securities on a principal basis. Piper Jaffray research analysts receive compensation that is based, in part, on overall firm revenues, which include investment banking revenues.




CNBC.com with wires.