"No Red Alarms or Red Alerts": Traders Sadana, Dispennette Say 'Buy the Dips'

Publie le 10 decembre 2010
(http://finance.yahoo.com/tech-ticker/no-red-alarms-or-red-alerts-traders-sadana-dispennette-say-buy-the-dips-yftt_535704.html)

Since major average hit multi-year highs earlier this week, the broad market has moved sideways in a relatively tight range. On Friday morning, an early rally attempt petered out quickly and major averages were recently hovering near breakeven.

But expect more gains, at least in the near-term, according to Smita Sadana, CEO of Sunrise Capital and David Dispennette, founder of The Stock Playbook. (Editor's note: The accompanying video was taped last Friday at Minyanville's Festivus event; technical difficulties prevented us from airing it until today.)

"There's no red alarms [or] red alerts on my screens: I think dips are getting bought and they are going to be bought," Sadana says. "There's no [technical] divergences, no disconnects in the market that I see."

In a recent presentation, Sadana provided the following rationale for her bullish view:

* The S&P 500 found major support at its 50-day moving average during the latest pullback.
* Market Internals holding strong: The advance-decline Line has kept pace with the market advance.
* Several ancillary indexes have broken out through recent highs, such as Dow Transports, Russell 2000, Semis, Energy and Retail.
* Strength in the Russell, semis and emerging markets signifies an increased appetite for risk, which bodes well for future market action.

Suggesting momentum plays like Apple, Google and Netflix are "getting tired," Sadana sees rotation into a host of other areas, including financials and semiconductors while commodities are "still hot."

In terms of recommendations, she likes (and owns) financials such as Goldman Sachs and Citigroup, as well as emerging market plays like India.

"I do see some macroeconomic worries in the future [but] I don't think in the trading environment we have something to be worried about," Sadana says.

Dispennette largely agrees, suggesting "there's a bill to be paid" for QE2 and predicting the S&P 500 is likely to be right near current levels a year from now. But "it looks like we might have clear sailing" for now, he says. "I would buy dips like Smita said."

Dispennette prefers small-cap stocks and is particularly bullish on China. "They'll have some bumps along the road but I don't there's a bubble," he says.

Dispennette's recommendations include food processors like Zhongpin, and Yuhe International, edible alcohol producer China New Borun and insurer CNinsure.