No support if 4,400 is broken: Sudarshan Sukhani

Excerpts from CNBC-TV18’s exclusive interview with Sudarshan Sukhani:

Q: Is the pullback rally over you think?

A: Yes it is over. In fact yesterday morning when the Nifty touched 4,680 and then started retreating- 4,700 and 4,680 were very close by. So that was a swing trader’s dream, that was a shorting opportunity and I am sure many people must have taken it. The Nifty moved up, reached its target; the short-term trend the uptrend is over - we are back to where we started the intermediate downtrend already continued and I presume that the short-term trend is likely to become down again. When does this trend change back to up? When we cross 4,700 decisively; till then will assume that we are in a downtrend in all timeframes.

Q: What target do you play for from the short now, do you think we are going back to retest the lows, where we bounced from?

A: That is difficult to say - what is happening now we have talked about it. Earlier 4,400 is that critical level, it’s like standing on the verge of a cliff. Below 4,400, there is nothing visible, which means there is no support. So far as we are not falling apart - 4,400 support could emerge again, things could become better. And if that level is broken decisively and that would be broken not just in the Nifty but across all blue-chips, which are similarly on the verge of either this way or that way, then there is no level. There is no target we will just have to wait it out. So we’ll just hope that 4,400 holds again.

Q: For somebody who went short yesterday and carried about 50-odd points home on the Nifty if you get another 50-point gap down would you consider booking profits or its better to keep the short open?

A: I am short in the Nifty - so that’s a disclosure. On a gap-down, I will probably book profits somewhere or the other. Although for a positional trader, I don’t think there is any need to book profits its just that I am a very short-term trader. So that depends on your trading profile.  

Q: What about banks - they rallied day before - fizzled out yesterday, what are the charts suggesting in the big one’s like ICICI Bank, State Bank Of India (SBI)?

A: It is much better not to look at the charts of the big ones. ICICI Bank is suggesting that below Rs 750-700 just like the Nifty there is nothing there, then the next support comes at Rs 500. I am not saying that ICICI Bank is going to reach Rs 500 I am simply saying that the risks are so large in these charts that is not worth considering an investment. So the only way we can do work in these counters or even in the market today is by becoming traders take those 2-3 days pullback; whenever possible or try to go short either of them is not going to be very rewarding. So banks at this point of time are doing what the Nifty is doing, either they pullback and that will be dramatic or if they fall that’s going to be equally dramatic, so this is a high-risk scenario just stay away.

Q: Where does it go from here, you have seen early trade hovering around 4,525 what is your next bet Nifty?

A: There is no sense in trying to make a bet, I wouldn’t know. But today is not a good day to trade because this gap-down could go either ways, it could go and accentuate another 50 points down is possible. But as we have seen earlier, this could actually reverse and move up and there is no sense of direction as of now. So if a person already has short position then they can as well be maintained because the thrust is downward. But at this point, to initiate a new short position is difficult and certainly it is not a good idea to go and buy, so today is the day of probably stand and watch.

Q: Two frontline pharma stocks both trading at 52-week highs Sun Pharma and Ranbaxy?

A: We have talked about Ranbaxy, we were talking about it that it was bullish when it was at Rs 300-350, at that time the bull trend was just starting now its touching 52-weeks highs but it is also pushing against its all time highs that’s a level of resistance. I think smart money was buying at Rs 300-350 I don’t think they are buying at Rs 600 now this is a time when it is facing all time highs as resistance take your profits and stay away from the stock this is no longer a buying opportunity.

The second was Sun Pharma, which has a better chart in a sense its really making those new highs regularly, consistently. Its an opportunity to go long on a decline even in this market you could at least not loss money.

Q: There is quite a bit of a sector rotation going on in the market what looks like the best cluster of stocks to pick from if you have to take some long trades?

A: I would go for cement as one sector, where there is a bottoming out process that has been continuing for a month or so and there seems to be a sense that probably if the market remains stable, then this is a sector that is likely to outperform. And the second could be the infrastructure which has been badly beaten including today that gives a sense of exhaustion, so that is more of contrarian buy but these stocks do get exhausted, they are primarily investment or short-term investment opportunities, not day-trading opportunities but I think that is what we are talking about.

Q: Two frontline pharma stocks - both trading at 52-week highs Sun Pharma and Ranbaxy?

A: We have talked about Ranbaxy, we were talking about it that it was bullish when it was at Rs 300-350. At that time the bull trend was just starting now it’s touching 52-weeks highs. But it is also pushing against its all time highs - that’s the level of resistance. I think smart money was buying at Rs 300-350; I don’t think they are buying at Rs 600 now. This is a time when it is facing all time highs as resistance take your profits and stay away from the stock this is no longer a buying opportunity.

The second was Sun Pharma, which has a better chart in a sense its really making those new highs regularly, consistently. Its an opportunity to go long on a decline even in this market you could at least not loss money.

Q: There is quite a bit of a sector rotation going on in the market what looks like the best cluster of stocks to pick from if you have to take some long trades?

A: I would go for cement as one sector, where there is a bottoming out process that has been continuing for a month or so and there seems to be a sense that probably if the market remains stable, then this is a sector that is likely to outperform. And the second could be the infrastructure that has been badly beaten including today that gives a sense of exhaustion. So that is more of contrarian buy. But these stocks do get exhausted, they are primarily investment or short-term investment opportunities; not day-trading opportunities. But I think that is what we are talking about.