Technical analyst, Sudarshan Sukhani, s2analytics.com is bearish on the market and has a downside target of 5,500 on the Nifty.
Railway Budget will be presented today and the Union Budget 2013 is just around the corner, which can cause cause temporary aberration in the downtrend.
The more the market falls before the Budget, stronger are the chances of a sharp volatile upmove coming into the picture, Sukhani told CNBC-TV18.
"So, short-term trader should avoid taking short position. Have positional shorts, maintain them and let the market go wherever it wants. However, on an intraday short-term basis till the Budget, the bias should be on the long side," he added.
Below is the verbatim transcript of Sukhani's interview with CNBC-TV18
Q: Difficult global day, what kind of Nifty position would you take in today?
A: It is a difficult global day. However, I would say that the pieces of the jigsaw puzzle are coming together. We have been bearish on the market suggesting that a downside target of 5,500 is visible. That works out but the problem for Indian traders is the big news event and this news event can cause a temporary aberration in the downtrend. That is very likely. The more the market fall before the Budget the stronger the chances of a sharp volatile upmove come into the picture.
So, for the short-term trader, taking a short position is not a good idea. You have positional shorts, maintain them and let the market go wherever it wants. However, on an intraday short-term basis till the Budget the bias should be on the long side.
Q: You have buy call on Ranbaxy Laboratories, which did well yesterday?
A: Yes. That is a buy on dips or rather it is a falling knife trade. It did well yesterday. It was flat for the last two days but it was been falling much before that. The chart suggests that the stock is deeply oversold. If not anything, will get a relief rally, if there is something more the positional traders will benefit. However, for today Ranbaxy easily see follow-through of yesterday’s gains. So, it makes sense to buy it and better if one get it little lower in the morning.
Q: You think the rally in some of the oil marketing companies is done with?
A: It is done with. They are making intermediate tops so it is not just a short-term trade. Both Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) are suggesting that the trend is over for the time being, they are looking at lower levels, of course that will eventually work out and then revert back to an uptrend. That is in the future. As of now lower levels are coming. These are short selling ideas and they should be short sold.
Disclosure: I have no holdings in the stocks discussed.
Q: You are cautious on Oriental Bank of Commerce (OBC)?
A: Yes, most public sector banks have cracked. There are no support levels left, they are just falling and OBC is one of them. The last support at Rs 310 has fallen, given way. It is like a freefall. We cannot even say that it will stop here because we do not know. The trade here is to follow the momentum, which is very visible on the downside. Yesterday’s decline should see follow-through in this bank. Therefore, it is a short selling idea.
Q: Tata Motors is looking strong again, technically.
A: Much better than we imagine and much better than most people think. This market has been doing this consistently, repeatedly cyclical. It rewards blue chips then there is a season for midcaps that lasts for 20 days and then it starts switching to blue chips again. For the last 20 days there is no season for midcaps. It is only blue chips.
Tata Motors is one of the better stocks; every dip in this is a buying opportunity. Yesterday’s small rally should see a lot of follow-through, after all the money has to go somewhere. I would be a buyer here whenever there is an opportunity.
Q: Ambuja Cements still looks good?
A: It still looks good. It is now crossing hump of Rs 200 and that suggests that the correction in cement is over. I get the impression that cement could do the opposite of what the Nifty is doing, which means the Nifty could fall, which is what I have been saying and cement could move up. However, in any case we should be looking to buy it.
Q: You are not bullish on JSW Energy?
A: The last support levels for JSW Steel have cracked. The entire Jindal group - the charts are showing that the end of the decline is not over, almost all the stocks are promising lower levels.
JSW Energy had big rally and then a decline that was a V-shaped decline, up one day and suddenly starts falling the next day and keeps on falling. The final support levels were broken yesterday that suggests that much more downside is coming.
Q: Any takeaways from preopening in terms of how you want to approach the Nifty?
A: I think the takeaway is exactly what we think. The intermediate trend is down, maintain short positions and do not try to go short intraday. The intraday trades, I suspect are still buying on dips. These are only intraday. We do not want to carry short-term positions anyway. The longer term positions intact on the sell side. However, this week could be volatile and the volatility should benefit the bulls rather than the bears.
Q: In the event of a post Budget rally, which all of us have been discussing, where would you draw the line in terms of technical targets for the Nifty?
A: The technical target for Nifty is around 5,980 to 6,000 and while it sounds outlandish because that would be more than 150 points from where we are. That is possible. We have seen it many times, which is the reason why I feel little hesitant in taking one-two day short position. The risk is far more than the reward. The short positions should ideally be only the positional trades. A 150 point in the Nifty is possible. I am not saying it can come about but it is quite possible.
Q: What did you make of Power Grid Corporation of India’s upmove technically yesterday?
A: Power Grid has a good chart. It’s gone through a deep correction. Now this stock is a buying opportunity.
Q: Your views on LIC Housing Finance?
A: It has come to a strong support level. At Rs 240 the decline in LIC Housing is probably over. The trade is on the long side rather than the short. I would be a buyer here.
Q: How would you trade Larsen and Toubro (L&T) from the frontline?
A: It is a sell, in fact it was in our list yesterday. Larsen and Toubro is showing bad chart patterns, breaking down from support levels. In fact BHEL with strong support at 200 is probably a better opportunity to go long, not L&T.
Q: What about Delta Corp, how much of downside do you see there?
A: There is much more downside. An immediate short-term, a couple of day target could be at Rs 58 but it is going below Rs 50. It is not just Delta Corp; all midcaps have terrible chart patterns but the worry is that the pattern targets are not visible, they are much lower.
Q: What about Ashok Leyland, which has been trying to put in defense around Rs 22.5-23 levels?
A: I would be a seller. It has made a big intermediate distribution. I am assuming this is a consolidation in an ongoing bear market. I would be looking to short it, not buy.
Q: Would you use the weakness in DLF yesterday as an opportunity to buy or do you think it is headed for some correction?
A: Another Rs 10 correction in DLF is possible but I would use any dip in DLF on a sense that the correction is over to buy it. I would not short it. The chart patterns are attractive for long-term traders.