'Fast Money' Recap: Tech Is for Real

Mike Taylor

Stocks in the U.S. kicked off the week with a bang Monday. The Dow added 1%, the S&P 500 climbed 1.1%, and the Nasdaq jumped 1.8%.

On CNBC's "Fast Money" TV show, the traders observed that bullish action in Merrill Lynch (MER Quote) and Apple (AAPL Quote) helped lead large-cap technology and financials higher. A relief from surging oil prices also helped drive the rally in stocks today, they said.

Guy Adami said that the large-cap technology story is real. He said Microsoft (MSFT Quote), Cisco (CSCO Quote) and Intel (INTC Quote) behaved appropriately in today's market.

Jeff Macke said that investors should respect today's price action. He pointed out that there were many reasons to sell stocks today, but buyers came out and brought the market higher. He said the shorts who hate this market are on the wrong side of the trade.

Pete Najarian pointed out good news from Research In Motion (RIMM Quote). He said Apple is riding the coattails of RIM's rise. He said Apple's price action looks strong and the stock may be cheap on the basis of its forward price-to-earnings ratio.

Further Rumblings

A report said that Hewlett-Packard (HPQ Quote) may buy Electronic Data Systems (EDS Quote) in a deal valued at between $12 billion and $13 billion.

Najarian said that IBM (IBM Quote) looks strong on this news because its business services acquisitions have already hit the bottom line. He said this deal would cost H-P a lot of money. He noted interesting call activity in EDS as this news broke.

Macke said that H-P shares got beaten down on this news. He noted that the company will be reporting earnings soon.

Adami said IBM is bullish and is the trade off this news. Macke said that the EDS acquisition is a one-off deal, and it doesn't mean there will be a huge rollup in the technology space.

Transports on the Move

The traders noted a strong day for the transportation sector, buoyed by positive action in FedEx (FDX Quote), UPS (UPS Quote) and the airlines.

Adami said that investors can't deny FedEx' price action. He said he still likes the company for the second half of the year. Macke said the action in UPS didn't provide a buying opportunity. He said not to chase the stocks, but that investors should respect the price action.

Najarian noted that on the decline in oil refiners such as Valero (VLO Quote) and Tesoro (TSO Quote) also moved higher today. He recommended taking a look at Pride International (PDE Quote) which had heavy call activity and is at a 52-week high.

Adami said Valero might still be cheap despite today's run.

Seymour pointed out that China demand seems to be weakening. He said that if that trend continues, oil bears will begin hitting the commodity.

The Bouncing Buck

The traders also observed that the U.S. dollar appears to be strengthening. Adami said people are beinning to believe in the dollar. He said that crude is a real commodity, and he recommended shorting gold for a synthetic trade on the dollar's rally.

Seymour said that the European Central Bank may be turning dovish here, and the fed funds futures indicate that people don't believe the Federal Reserve will ease rates into the year end. He said this news is bullish for the dollar.

Macke said a rally in dollar prices will put an end to an earnings boost for U.S. multinationals who benefit from a weak dollar.

Seymour said investors can short the CurrencyShares Japanese Yen Trust (FXY Quote) or the CurrencyShares Euro Trust (FXE Quote) as a trade off this news.

Fluor (FLR Quote) delivered an earnings beat, and shares jumped after hours. Adami said that the company raised guidance. Some have been concerned about the valuation, but he thinks the story is still strong, he said.

Najarian said that Foster Wheeler (FWLT Quote) delivered similar news last week. He said that the global power play is still strong.

Cablevision (CVC Quote) announced it will buy Newsday. Macke said that the deal was a bad move. He lambasted the Dolans, which control Cablevision, for spending shareholder money on "vanity projects that don't make sense."

Roll Out the Barrell

The traders spoke with Jon Merriman of Merriman Curhan Ford about possible energy trades. He said that he believes oil prices are soon to fall.

Najarian pointed out that solar names appear to compete with natural gas and coal companies instead of oil.

Merriman said that solar companies can still perform well even if oil trades down to $70. He said he likes Energy Conversion Devices (ENER Quote), which has only recently started to run after beating on earnings several times in a row. Najarian said he also likes the stock. Merriman also recommended Emcore (EMKR Quote), which he said could go to $16.

Cruising Wal-Mart

Retailer Wal-Mart (WMT Quote) reports earnings tomorrow. Macke professed his admiration for the stock, saying brokers love it, the company has set expectations low, and the company's valuation has finally become reasonable after a big run.

Seymour observed that 24% of Wal-Mart's income comes from international sales. He said that he likes Wal-Mart's international story and that investors shouldn't discount the impact of the economic stimulus package on Wal-Mart's earnings.

Macke said that it's difficult for a retailer to succeed overseas, and that Wal-Mart's international success indicates how strong it really is.

Najarian said he believes that Wal-Mart, like McDonald's (MCD Quote), is ahead of itself. He said Target (TGT Quote) can make up some ground against Wal-Mart. Adami observed that Target sports a cheaper valuation than Wal-Mart, but he said he still believes Wal-Mart will go higher.

Let's Go to the Charts

On a falling price in oil, the traders talked to technical analyst John Roque about some possible trades. He said viewers shouldn't move to early cycle stocks but should stick with commodity-related items. He said DryShips (DRYS Quote) is worth a look here. He also said that El Paso Energy (EP Quote) could go to $24. He said Oceaneering (OII Quote) broke out of a base on Friday and could go to $86.

Najarian said he likes a lot of these names. He agreed that DryShips looks ready to go up. He said he also likes Genco (GNK Quote). Seymour said he also likes Genco, and that a shortage of ships is supporting shipping rates.

Adami warned viewers that DryShips is a very volatile stock. He said he likes it on a valuation basis but urged investors to be careful.

Trader Radar

Ann Taylor (ANN Quote) traded up today on unusual volume.

Trade the Future

Observing that in the future robotics will play a larger role in medical care, the traders looked for some plays on the trend. Najarian said that the toughest roadblock for companies like Intuitive Surgical (ISRG Quote) and Hansen Medical (HNSN Quote) is the cost of their devices. He said it will be a long time before the machines come down in price.

Adami recommended Zimmer Holdings (ZMH Quote). He said the company is well run and is cheaper than Stryker (SYK Quote).

An earthquake in China brought the country to the attention of the traders. Seymour said the country still faces large inflation problems and social turmoil. He said he still likes Chinese Internet companies like Baidu (BIDU Quote), Sohu.com (SOHU Quote) and Giant Interactive (GA Quote).

Final Trade

Macke picked Wal-Mart. Adami chose Cisco (CSCO Quote). Seymour selected Turkcell (TKC Quote). Najarian said he likes Applied Materials (AMAT Quote).

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