Technical analyst Sudarshan Sukhani of s2analytics.com sees yesterday’s strong upmove by the market as a sign that the correction is over.
Speaking to CNBC-TV18, Sukhani says that the market has seen a bounce from its lows, meaning it has revered its patterns. “The pattern was confirmed in two different ways; first by the Nifty itself and second by a lot of the index heavyweights making new highs for this uptrend, which means they are at levels above the 5,350 level of Nifty,” he explained.
From here on, Sukhani expects the market to continue to remain choppy, but says the Nifty will start its move towards 5,200.
Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee.
Q: Any signs that even in the near term the market is attempting to breakout of this range?
A: It appears so. Yesterday we had a bounce from lows and that was a bullish reversal pattern. That pattern was confirmed in two different ways; first by the Nifty itself and second by a lot of the index heavyweights making new highs for this uptrend, which means they are at levels above the 5,350 level of Nifty.
So yesterday we went long. I would assume that the correction is over. The correction boundaries were 5,100 to 5,150. From here, if we chop around few more days or decisively break over 5,350 the market will tell. But we are pushing towards that.
Q: You have ICICI Bank on the buy side?
A: ICICI Bank went into a consolidation rather than a correction after the big rally in banks. The Nifty corrected 180 points but ICICI Bank did not. It just moved around and yesterday it broke out to new highs for this uptrend. That is bullish in different respects. ICICI Bank will be an outperformer and that seems to be working out. So today assuming that the market gain more traction even after the gap up, ICICI Bank should be a big winner.
Q: You are bearish on Oriental Bank of Commerce?
A: Yes. We were suggesting one should go for Bank Nifty as a long or a short idea rather than individual banks because buying the Bank Nifty is easier. It is becoming very difficult to pick on independent public sector undertaking (PSU) banks or others for buying. Oriental Bank of Commerce is fairly downbeat. Yesterday it broke down from support levels after a rally but if the markets are supportive today the stock may not collapse. But it still remains a short selling idea. Assuming the markets turnaround, do not cross 5,300, Oriental Bank certainly would be in a much deeper decline.
Q: You are buying Coal India as well?
A: Coal India consolidated while the Nifty was falling 180 points and yesterday it broke out above the highs which were matching 5,350. So Coal India is at new highs for this uptrend. Any stock that is making new highs must be treated with respect especially when it’s a blue chip like Coal India. One must go long in it. It is giving a target of Rs 400 for positional traders.
Q: Your views on Hindustan Unilever (HUL)?
A: Hindustan Unilever is a different story. It is not making new highs. It corrected 5-6% on the downside. It is in a trading range and it is breaking out of that trading range. It needs to go to 20 points higher before it makes those new highs but given the fact that HUL has been an out performer generally, I am assuming that it will catch-up, first it will reach Rs 465 and then cross it.
So there is a lot of traction on the upside if the Nifty is to go up. These stocks are going to be more rewarding than the Nifty itself.
Q: You have HDFC on the buy side?
A: HDFC made new highs for this uptrend - comparable to the 5,350 levels for the Nifty. It’s a blue chip. HDFC has been a relative underperformer for the last few months till it started its rally. I think it will play catch-up. HDFC is an index heavyweight. When the index needs to be pushed up, ITC, HDFC, HUL are ideal candidates to be taken and brought up.
Q: You have a sell on Jindal Saw?
A: Jindal group is doing nothing, the steel stocks are in miserable condition and Jindal Saw after a brief rally is consistently coming down. It is a stock that could keep on coming down even if the broad market goes up. In case the broad market doesn’t go up, it’s an ideal hedging in the sense one can hedge long positions or independently it’s an ideal short selling candidate. It is not doing anything good.
Q: It is more sedate than we expected in terms of a pre-opening indication, what kind of immediate markers are you setting on the upside, on the Nifty today?
A: I would expect a move towards 5300; the market yesterday itself gave some signs of life for the bulls. I think no matter where we open this uptrend should persists, whether we reach 5300 or not but that is what the target should be, so the trade is to be on the long side. Wait for 5-10 minutes buy the highs or during the day buy the dips but try to buy.
Q: What about something like Voltas, it made a move yesterday. Do you think it’s good for more?
A: I think it’s good for more it’s moving towards Rs 120. It is a little volatile but in spite of the volatility the trend is up. The moves have been on the upside, which means repeatedly its getting support at lower levels. So even for the day, I would be a buyer and certainly for the next few days. One can look towards a bigger move.
Q: Tata Communications amongst the telecom stocks stood out yesterday, your view on that?
A: It stood out after probably months and years and it’s on back of news. So just purely on the basis of charts it is a buy because it made new highs, but I would not touch it. Yesterday’s rally is itself suspect, so it is not a short sell but it is at best avoid.
Q: There has been some activity on tea stocks, on McLeod Russel what kind of targets would you set?
A: I would look at Rs 330-350 as an initial target, yesterday it was in our buy list and it has come in our buy list repeatedly. So this is a stock that is going up, giving us clear signs and anyone buying on dips makes money. These are ideal stocks, you stick with it.
Q: Tata Motors is up today, it has lost more than 6% in the last three days, any clarity on which way the stock is trending?
A: No, the stock has fallen again after the rally. It has come to Rs 215, which is where its final support is. For all I know that support held yesterday and with some better moves on the Nifty today, this support could hold but it is not a buy. It is too early to even think of buying. So the only trade in Tata Motors could be if Rs 215 breaks down again then we look at significant decline that would be a short sell till it doesn’t break down it is best avoided for now.
Q: Yesterday some of the metal stocks perked up how is Sterlite Industries chart looking like to you?
A: It is a good chart. Firstly it has gone through a deep correction and that correction stopped almost exactly at Rs 105, which is a significant support level for Sterlite. That is the point at which we thought the stock should find some support and stem its decline. That happened because nifty was better yesterday.
At this point Sterlite is a buy, the stops are very tight. If yesterday’s lows are broken then clearly the trend has not changed. So with a very small risk it’s possible to get a reward, again towards Rs 120-125. It is a very good trade.
Q: Your view on Hexaware Technologies?
A: We have been downbeat on Hexaware for a long time now. I had suggested that the trend there is giving a distribution pattern and Hexaware has fallen and yesterday it cracked its final support. So even if it rallies a bit today that would be a selling opportunity. I think the stock is going much lower, probably it will go below Rs 90. It is a disappointment but it had a very good rally and it is coming back again that is the way market is.
Disclosure: I have no holdings in the stocks discussed.