Recap of CNBC's Fast Money, Thursday October 16.
Volatile Range Trading
Dillan Ratigan began a discussion of the wild volatility in the U.S. stock market. Pete Najarian said the volatility is remarkable and investors should expect it to continue for the next couple of days. Joe Terranova explained the market is going through a "digestive process" and trying to make a bottom. Guy Adami says "the Dow is now in a range between 8300 to 9500." He told viewers to sell options when the Dow goes lower. Karen Finerman mentioned she continues to look for value on the big down days and sell protection on the big up days. She says, "The market is experiencing hedge fund redemptions right now, and once that is over, we can start to focus on fundamentals again."
Big Bounce – Google (GOOG)
Ratigan moved the conversation to the big jump in Google shares after hours. Najarian says "Google blew out everybody's numbers." He said Google controls 72% of the market share in the search space and the company is continuing to hire. Adami said Google should trade at a 25 multiple, which would put the stock at $475 per share. Finerman said she loves Google's large cash position. Terranova suggested another reason to buy Google is the rising dollar.
Trades - Reliance Steel & Aluminum (RS), Nucor (NUE), Freeport McMoRan (FCX), Schlumberger (SLB)
Ratigan asked whether there is a trade in the oil market. Terranova says "oil takes the pulse of the global economy." He explained that crude oil didn't see heavy selling pressure when it traded below $70 a barrel and that tells him the deleveraging process is coming to an end. Adami says the best trade in the energy space is gasoline. Najarian says "Reliance Steel & Aluminum and Nucor reported outstanding numbers today." He says the P/E levels on these stocks and Freeport McMoRan are interesting. Terranova says "natural gas is hanging in there." Adami said Nucor is a buy on valuation basis. Najarian said he bought some Schlumberger and sold calls against it with volatility so high. Ratigan that several well known hedge funds, Citadel Investment Group and Highland Capital Management, are reportedly in trouble. Terranova says "a lot of hedge funds out there haven't seen the crisis we are experiencing right now." He said some of the hedge funds out there don't understand the risk they are taking.
Hedge Fund Inexperience - Cleveland-Cliffs (CLF), CME Group (CME) and Intercontinental Exchange (ICE)
Strategic investor Dennis Gartman joined the traders to discuss the inexperience in the hedge fund community with trading in a high-volatility environment. He says "volatility right now is frightening and unlike anything I have ever seen." He told viewers it was interesting to see people moving into commercial paper today. Gartman pointed out that some monetary authorities will have to sell gold to raise capital to put back into the banking systems. He said he plans to buy more bank stocks and natural gas trusts and not hedge them as aggressively. He owns shares in Cleveland-Cliffs, CME Group and Intercontinental Exchange.
Suggestions – Wal-Mart (WMT), Apple (AAPL)
Adami said investors should take a look at Wal-Mart. Gartman says "Apple should be bought because the stock had an outside reversal day."
Rationally Irrational - AK Steel (AKS), MetLife (MET), MGM Mirage (MGM), IBM (IBM, General Mills (GIS), Charles Schwab (SCHW)
Jon Najarian joined the gang to discuss how to trade the irrational stock market. He said, "Trade the market you have not the one you wish you had." He told viewers he bought AK Steel, MetLife and MGM Mirage at depressed levels and sold calls against them. He says "the bigger the volatility the more premium there is in those options." Adami says "if you take emotion out, then IBM looks like a buy." Terranova said, "There is no reason General Mills should have went to $56 a share on Monday." Pete Najarian said he likes Charles Schwab under $25 a share, because "they don't have any exposure to subprime slime."
Bear War - United Technologies (UTX), EOG Resources (EOG), Diageo (DEO), Abbott Laboratories (ABT)
The crew discussed some ways to battle the bear market. Adami mentioned that United Technologies raised guidance for the next quarter. He says, "UTX is cheap trading at 10 times forward earnings." Terranova said he likes EOG Resources expecting a bottom in natural gas. He says "this stock should get back above $100." Finerman recommended playing Diageo on cash flow, valuation, market position and dividend yield. Najarian suggested Abbott Laboratories. He said Abbott just raised its full-year guidance.
Trader Radar - Sherwin-Williams (SCHW)
Sherwin-Williams was among the most actively traded stocks in the NYSE today.
Your First Move for Friday October 17th.
Guy Adami likes Novartis (NVS).
Karen Finerman likes a pairs trade; long the Oil Service HLDRS (OIH) and short the United States Oil Fund (USO).
Joe Terranova suggests long ExxonMobil (XOM).
Pete Najarian says Chesapeake (CHK) is a buy.
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