Technical analyst Sudarshan Sukhani, s2analytics.com told CNBC-TV18 that after yesterday’s breakout Nifty should have been pushing towards 5,400, but the close was little disappointing and it gave up 15-20 points of gains.
So, he expects the market to start on a lower note today.
“The trade is still on the long side, but now our stops have been raised to 5,300, any close below that and the long positions will be completely shutoff,” he suggested.
Below is the edited transcript of Sukhani's interview with CNBC-TV18. Also watch the accompanying video.
Q: Still looking like a range bound market or do you think after yesterday’s close we are pushing to make some kind of a move on the upside even in the near term?
A: We should have done that which means after yesterday’s breakout we should have been pushing towards 5,400 but the close yesterday was little disappointing. We gave up 15-20 points of gains.
Today, the chances are that we will at least open lower. So eventually there will be one final breakout that doesn’t work out and it’s the beginning of the correction. I do not know if this is the one, but I would not be very upbeat or bullish on this.
The way to manage it is by keeping volumes under control. The trade is still on the long side, but now our stops have been raised to 5,300. On any close below that and the long positions will be completely shutoff.
Q: Do you expect more pressure on ONGC this morning?
A: Yes, I would think so because ONGC after a spectacular rally entered into a resistance zone at Rs 290, which is the zone where it has retreated repeatedly. It’s just a matter of chance that that was also the point when crude started rallying. I think ONGC would have retreated either ways. But with the news against it and with the resistance level which is very visible ONGC should now go through a deep correction. Here is a short sell and even if the Nifty were to be choppy this one comes down.
Q: What about Orchid Chemicals and Pharmaceuticals. It has been on an uptrend for the last 10-15 days now?
A: It has been. One must remember that it fell from Rs 250 to Rs 108. So the uptrend has started after the Rs 108 decline and that was a spectacular decline. But its not just last 10-15 days, Orchid Chemicals is now making some kind of a base for the last one-and-a-half months; it’s falling, rising and having a very decent rally from Rs 108 to Rs 125 or so.
There is a possibility that this stock is bottoming out. If that is so then yesterday’s gains should be built upon and it’s a buying opportunity for position traders where one is buying at the lows. So for either of them, day trading maybe one will see follow-through today, for position traders - buy it, hold it patiently and if this is a base, if this is a bottom then one is getting at very low.
Q: You have picked Dena Bank today?
A: Dena Bank crossed Rs 100. It is now at Rs 102, which is a good place to be in. It is at new highs. Dena Bank should be an outperformer among public sector undertaking (PSU) banks which means PSU banks should be an outperformers in the banking and in the overall market so it’s one of the better stock to be in. If one is having money and inclination then buy it and hold and short-term traders should take only one side of the trade and that is to go long in it.
Q: Century Textiles and Industries is also a buy?
A: Yes it is. Century Textiles has built a base. It made a double bottom. It came out of it. It was in our buy list earlier and that is persisting. The pattern suggests that there is much more upside here probably some kind of a bear market in Century is done with and a new uptrend is starting, which means the uptrend could be very young, one could see much higher levels here. The target of Rs 335 for a day trader or a swing trader but it will eventually reach Rs 400.
Q: You expect more from LIC Housing Finance?
A: If the Nifty decides to move up again LIC Housing Finance will outperform. We had this in our buy list. There is a significant resistance at Rs 275 and if this resistance is crossed then it’s in uncharted territory and that is a good place for a stock to be in if one is bullish. So the chance is to take the trade, if it moves up one will get bigger move and if it doesn’t one will still get few rupees
Q: You have a sell on Adani Ports and Special Economic Zone for this morning?
A: Adani Ports has been an underperformer. One has seen decent rally for the last few days and it stalled at Rs 125 level which has been a big resistance for it. Just as one is taking chance on LIC Housing assuming it breaks out then one will make big money. If this is resistance for Adani Ports then its going to retreat at least 10-15 points from here and that is a good decline for a short selling trader. Adani Ports has a tight stop loss. If it goes up then one should get out of it immediately and if it doesn’t then it’s going to come back quite a lot.
Q: It will start above 5300 for sure, 5360 is the level on the premarket rate, and how would you approach the trading day?
A: I expect the markets to remain choppy; the Nifty is likely to be some kind of a disappointment. It is unlikely to go up very high and on the lower ends, we have supports repeatedly. So those who have long positions as I have, will just keep maintaining those positions until the marekt decides to do either a big upmove or cracks below 5300. Today new trades are difficult to visualise for the index.
Q: We were talking about some of the banking faces; the big move was Dhanlaxmi Bank outside the index?
A: Yes and we must also keep in mind that Dhanlaxmi has been falling in a market that was rising. Yesterday it suddenly moved up. Now this could be the end of the bear market for Dhanlaxmi, its quite possible. But it is too early to say, we should go and buy it. The trend because of that one big move has changed but the trade here is to buy but not necessarily today.
But if this is genuine move, if this is the real breakout then we will see higher level of Rs 65-70 but it’s much wiser to wait.
Q: Did you have a look at the price and volume action for Nitco?
A: Yes and it is an interesting chart, Nitco fell and became half in just two months. It was at Rs 45 and then it came to Rs 23-24. So if this decline was backed by only some wild news which is my sense then this decline should stop and a new uptrend should start that is what Nitco is doing. It has made a bullish pattern, it has broken out of that pattern in style yesterday but even if we ignore yesterday’s big move the chart suggests that a base is in place and higher levels are likely. We look at Rs 33 for the short term trader but for position trader, we can look at gains as time goes by.
Q: What is happening with the Asian Paints, it has had a vertical rise and fall in the last one week?
A: It is probably topping out now; the chart suggests its beginning a process of distribution. Although it is never easy to say, this is distribution, it could easily turnout to be consolidation prior to another big move.
Asian Paints as of now, I am assuming is going through a process of topping out and if that is so, then the trade here is to go and sell it. Ideally you don’t want to short sell a blue chip like Asian Paints but you want to get out of your long positions.
Q: How would you approach Shree Renuka Sugars for the day?
A: I have been approaching it with a long bias for a long time. My point is that at Rs 25, we had said go and buy it, and same at Rs 27, at Rs 29, at Rs 30 and it is Rs 34 now. The targets for this are still Rs 40. But after these big rallies, all stocks correct. If I tell viewers to go and buy it now, it will be unfair to them. So this is not a good time to buy sugar. We have seen spectacular rallies, they inevitably will correct and that is the time to reenter. The trend is up.
Q: Your view on IDFC?
A: If I compare it with Shree Renuka, it’s a much better chart. The advice is to wait but in case of IDFC, it is consolidating, breakout and consolidating again, something that a wonderful bull market chart does. I am fairly upbeat on IDFC, we have a target of Rs 160 and that could easily be exceeded. This is not a day trade, you buy it and hold it or you keep on trading on the long side and keep on seeing that you have some positions in IDFC always. It is an excellent chart to be in.
Disclosure: I have no holdings in the stocks discussed.