The Sensex gained over 430 points on Friday, posting its biggest closing gains in the year 2012 as global markets rallied quite sharply after European leaders agreed to take emergency action to bring down Italy's and Spain's spiraling borrowing costs. The Nifty rose around 130 points to end at 5,278.90 on Friday.
Technical analyst Sudarshan Sukhani, s2analytics.com is now approaching the market carefully and cautiously. "From now onwards, I am assuming that markets will be much more volatile and that means we will see downside moves also," he said in an interview to CNBC-TV18.
He suggests that one should buy only on sharp corrections and not rush into a gap open.
Below is the edited transcript of Sukhani’s interview with CNBC-TV18. Also watch the accompanying video.
Q: How are you approaching trade this morning and what looks like a doable target for the Nifty once it cleared that 5,200 bump on Friday?
A: I am approaching trade now a little carefully and cautiously. The idea is that short-term trades were closed on Friday afternoon just before the close and that was good. But, now position trades will be held assuming that we are going to see a lot of volatility.
It is not likely that we are going to just take a step and reach 5,400 or 5,450. So from now onwards, I am assuming that markets will be much more volatile and that means we will see downside moves also. The idea is to buy only on sharp corrections and not rush into a gap open.
Q: You have a buy on Tata Steel this morning, tell us about that?
A: Yes, I have a buy on Tata Steel. The stock finally broke out above resistance level at Rs 425. I think most quality stocks have done that. But for Tata Steel it was a bear market of some kind, it fell below Rs 400, so this breakout tells us that the downtrend in Tata Steel is probably over. So inch-by-inch, slowly the stock is likely to move up. Today, in a choppy market there will be stocks that move up and stocks that go down. Tata Steel is likely to be one of the winners today. So for a day trader, it is worthwhile focusing on this. Buy on dips or even buy after the first fifteen-twenty minutes.
Q: Power had a good session in the last two weeks; you would buy NTPC this morning?
A: Yes, I would. In fact NTPC was in my buy list even last week, that continues. Again the same story, NTPC had a very terrible period; it went through a bear market of its own even while the markets were just in a 500 point range that seems to be over. So, if this is over and that message is coming not just for NTPC but for a lot of other power related stocks REC, PFC and even Tata Power then there is something going on in the power sector. NTPC is well poised to take advantage of it as the sector leader and as independent chart also. Friday’s gains were coming because of a strong breakout from a resistance level, they should be build upon.
Q: There has been quite a come back for the banks as well, Dena Bank you would buy today?
A: I would but I must confess that Dena Bank has been a bit of a disappointment. I really thought that it would fly away, it came in my buy list last week but it hasn’t done much. It is still in a trading range. I am assuming that this trading range will eventually resolve itself on the upside because today the markets should see some gains and at least selectively there will be stocks that go up. I am looking to buy Dena Bank but a little carefully because it didn’t do what I expected it to do last week.
Q: From the rate sensitives again, Indiabulls Real Estate?
A: Indiabulls is a much better chart. It has done the right things. It made a double bottom, we had it coming in our buy list repeatedly, it broke out of a double bottom then a small correction and it has again broken out. It is telling us that this is just a beginning of what hopefully will be a strong uptrend. In Indiabulls, we shouldn’t worry about the big rally we saw on Friday, everything rallied on Friday. Today, if we get it on a dip, I would be a buyer there.
Q: You have a sell on GE Shipping for the day?
A: It is a disappointment. Last week, we had one day when shipping suddenly started moving up but that was it. It was just one day. So on a day, in a period when the Nifty has gone up from 4,800 to 5,300, GE Shipping has done nothing at all. It remains in the lower end of a very wide trading range. So at best, it will slide down to its lower end, support levels and at worst, it will actually break down. So in either case, GE Shipping now is a sell.
I must also point that while the targets for this upmove are 5,400 or even 5,500, that is for the month end. So we are going to see ups and downs probably.
Q: You have a sell on GMDC as well?
A: Yes, GMDC had a good chart. It had a decent rally from Rs 160 to Rs 185. Here, there is significant resistance in this stock. Metals in any case are underperformers. So whatever performance was likely to come from the stock price has already come in.
In any event of a market say correction of a market consolidation, metal stocks are likely to be underperformers, GMDC because of the fact that it fell on Friday, tells us that the rally is over and it is likely to be the first one to see a correction.
Q: Even as an intraday call, how do approach the market today given the point you were making about the run through last week?
A: We are now going to see a slackening of momentum; it cannot continue like this every week, all traders know that. So we must be positioned to protect ourselves with that inevitable decline in momentum. That means the trend is up, so go for only long positions, till we see a reversal, Second don’t buy and jump in, wait patiently for deep corrections to go and buy.
Q: Would you go long on Tata Power which was the biggest gainer of last week?
A: I think so but go long only when the prices are conducive, which means when we see an intraday dip or a consolidation there is no rush. You don’t actually go long on gaps up now, not for this week. So. Tata Power remains a buying opportunity but just be patient to get your price which means lower than what it is prevailing, lower than the day’s highs.
Q: What about Aban Offshore, which had a good run last week?
A: It had very good run on Friday, it broke out from a very narrow trading range. It had come in our buy list after many months. Aban Offshore is also a buy but you cannot buy it today on back of Friday’s gains. There is a target of Rs 410 which is much higher but wait. This week is now becoming a game of patience because if you go and rush and buy gap ups then you will stay in the gap up price while the market or the stock corrects. So buy only on corrections.
Q: How would you trade S Kumars now?
A: I think the rally in S Kumars is over. It had a handsome rally from Rs 24 to Rs 36, probably 50% gains in one and half months but that is done with. My sense is that S Kumars is now rolling over on the downside. The first patterns are visible which are bearish, so I would sell S Kumars. It is probably a very nice short sell. Look for a modest target of Rs 33 and see whether this target can be lowered on the downside
Q: Your view on Kingfisher Airlines?
A: My target for this is Rs 10 and since it is now at Rs 12 the obvious trade here is to go and short it or sell it. Even shorting is not easy but if at all somebody wants to trade this stock it must be a sell, we should not make the mistake of thinking that it cannot go much lower because we all know it has.
Q: Is the run on Manappuram done or is there more on the upside there?
A: I think there is more upside but timing is important. If you buy Manapurram today morning, then you might end up while it chops around for a few days now. The ideal conditions for it would be to wait for a dip, maybe even below Rs 30 and that would be a perfect buy.
Manapurram’s target now which earlier was Rs 30 appeared to have increased to Rs 35. So there is money on the long side here.
Q: You would sell Cairn India today?
A: Yes, I would sell Cairn because it has done nothing. Today, Cairn could rally on the back of good gains of Friday. So rather than sell it just at the open, you have to sell it once the rally in Cairn is over, that is still a short sell. We look at Rs 280-290 as the downside target eventually.
Disclosures: I have no personal holdings in the stocks discussed.