Technical analyst Sudarshan Sukhani of s2analytics.com advises against trading on the short side today.
"For the day the market could easily be choppy, a gap down and then attempts to cover the gap and a lot of chaos could come around. So, today is probably not a good day to trade the Nifty," he said in an interview to CNBC-TV18.
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Below is the verbatim transcript of Sukhani's interview with CNBC-TV18.
Q: It is pointing to a start in the red, a bit of a gap down. How would you approach that as a Nifty trader?
A: The gap needs to be watched and not traded into. Our suggestion yesterday afternoon towards the close was to take profits on short positions and step aside. The market has given a lottery for the last two days and we had one when the market went up 100 points.
Therefore, this is as much as one can get as short-term trader. So, I would be suspect of taking a trade on the short side today. Our positional shorts are maintained, they were taken much higher, nothing has gone wrong in them and if the market does go down, the positional shorts will continue to maintain money. Traders must have some positional shorts with them. If they do not have it then any rally in the market should be used to build these short positions.
However, for the day, the market could easily be choppy, a gap down and then attempts to cover the gap and a lot of chaos could come around. So, today is probably not a good day to trade the Nifty.
Q: You are still bearish on Bata India. Do you think sub Rs 700 levels are coming?
A: Yes, they are coming. Bata has entered into a bear market. Many of the midcaps and largecaps charts copied and mimicked the Nifty; for three-four days these stocks went up and then the decline has started again. The small upmove is a bearish flag. Therefore, Bata also has made the same thing; a bearish flag, a sense that the downtrend has resumed and these small patterns are made midway in-between decline. There is a lot of pain ahead. I would be willing to maintain this position.
Q: Has something changed in Punj Lloyd because that seems to be even going up on down days for the market?
A: Yes. That certainly seems to be a suggestion. First, a big rally and this big rally in Punj Lloyd maintained itself and that is very unusual.
Punj Lloyd did not go back and gave up the gain. A small correction in Punj Lloyd stopped at Rs 50, which is a strong support level. Therefore, it is now outperforming and giving signs of relative strength. We would be buyers here. There is no question of selling it. The idea is if the market gives sign of an intraday life, Punj Lloyd becomes a buying opportunity.
Disclosure: Sudarshan Sukhani has no holdings in the stocks discussed.
Q: You have a short on Tata Steel this morning?
A: Our target for Tata Steel was Rs 330. However, market does not respect these targets. It is a blue chip stock and the target is Rs 285 or even lower. Therefore, the same small bearish flag was made in Tata Steel, it promises much lower levels. I do not think Rs 285 will eventually hold. This is a short-term target. However, the trade is to sell metals. Tata Steel is probably an appropriate stock for the day.
Q: You have a short call on ACC?
A: Yes. Same story; a bearish flag that suggests that ACC is eventually heading towards Rs 1,000 or by the time bear market ends, it will go below four digit number. However, messy situation, but a day trader should look to sell it at any break of opening support levels.
Q: Tech Mahindra is in your buy list?
A: It is in a buy list because both Mahindra Satyam and Tech Mahindra are in an uptrend. We have seen sharp declines. These declines, I assume are corrections rather than reversal of trend. If this is a correction then Tech Mahindra is at Rs 950, found strong support yesterday when there was carnage all over including carnage in IT. However, Tech Mahindra stopped at that, Rs 950 is a strong technical support. It is worth buying into. If the uptrend is intact and the uptrend is intact in most IT stocks then yesterday was a correction and today should be a buying opportunity.
Q: Sun Pharmaceutical Industries continues to come in your buy list?
A: Yes. It is making lifetime new highs. Every time we buy with a lot of suspense as is this going to work out or will there be a failure. And Sun Pharma gives rewards.
Do not question this rally. The rally is intact and pharma as a sector is doing very well. Sun Pharma is a buying opportunity for the day, wait for a dip rather than going headlong.
Q: How would you approach trade if you get a quiet kind of start on the Nifty? You wait to see a sharper dip or you initiate some kind of buying action there?
A: I would like to buy the Nifty today. We are very close to a strong support level, 5,550 is visible on the charts. It is difficult to imagine the Nifty; it is falling day by day relentlessly. Therefore, the absence of selling should propel this market higher in the short-term. I do not think buyers will willing come. There is no value buying. I doubt that. However, it is just the sheer absence of short selling and then there would be some short covering. So, technically we are at 5,550. Today, if there is a sharp dip certainly it is a buying opportunity, but if the market opens flat and begin to go higher even that would be a go long opportunity.
This is froth with lot of risk, trying to make an intraday long buy in a market that is so steadily going down. So, traders must understand the risks.
Q: How would you look at a stock like Shree Renuka Sugars, which is likely to start strong today?
A: I would be buying it; in fact Shree Renuka Sugars was a buying suggestion yesterday afternoon and that should continue. Shree Renuka has bottomed out in the short-term. It has done something better while the market was going down. Therefore, take a long trade.
Q: Is there more downside you see on a stock like Idea Cellular?
A: Yes. The charts have turned terrible just as Bharti Airtel has now given the sign of a confirmed head and shoulder breakdown. Idea is making a pattern called descending triangle, another major distribution pattern. So, in the intermediate term much more downside is there. However, for the day traders, for the short-term traders, lower levels are coming.
Q: How would you trade Jaiprakash Associates after yesterday’s 6 percent crack?
A: It has given up all the gains of the last five days. It is back where it has started with the lows of the downtrend. It is probably moving lower. Market could remain choppy so that caveat is a matter of tactics but JP Associates is heading down.
Q: How would you trade Pantaloon Retail?
A: Pantaloon is also heading down. That is said with some regret because Pantaloon may bottom out; Rs 140 is a strong support level. I do not think that is going to hold.
Q: What do you make of Infosys, technically?
A: I would buy it. Yesterday the CNX IT contributed significantly to the Nifty’s decline. One must remember that IT stocks are in an uptrend and a day does not make a trend. Today, if the IT stocks do not selloff then that will provide some cushion for a bounce back. I would be a buyer in Infosys.
Q: Your views on Coal India?
A: It is a short sell, in spite of the news that we have seen there is a gap; Rs 325-317 area is a vacuum, it is a gap. I do not see Coal India filling that gap and chances are that it is going to move down. Rs 325 is a stop loss and it is a short sell.