Aug 08, 2013 11:30 AM IST | Source: CNBC-TV18

Don't play relief rally to build longs; stay short: Sukhani

Market likely to be choppy, any rally should be sold into. Those who do not have short positions, use the rallies to build short positions, technical analyst, Sudarshan Sukhani, s2analytics.com said.

In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.com shared his reading and outlook on market and specific stocks.

Also Read: Cues that will decide Nifty's course today

Below is the verbatim transcript of Sukhani's interview with CNBC-TV18.

Q: Yesterday was a choppy day but we still ended in the red. What is the view for today?

A: This is a strongly trending market. We are trending on the downside. Once we have a strong trend, intraday trades become difficult to take because a lot of the movement comes on gaps. Therefore, the view remains that this is a strong trend, we are going to break; we have virtually broken 5,550 level but we are going to break it decisively. So, that is a qualitative adjustment. We will break it; we are moving towards 5,000-4,900; difficult to say when.

In this environment the trade is to be on the short side. I would not even venture to take a relief rally, intraday. It is possible that we may get one today. It could come any day. If that happens, we step aside because the first relief rally is going to be treacherous. If a correction starts on the upside, a sustained upmove of 100-200 points then maybe part of it would be tradable. However, for today market is likely to be choppy, any rally will be sold into. That is what I would do. Those who still do not have short positions, use the rallies to build those short positions. Now buy September Puts.

Q: What kind of targets do you see for Tata Consultancy Services (TCS) in this correction?

A: TCS has just begun a journey and that is surprising because it was as if TCS can do not wrong and we have had buy signals in TCS repeatedly. That seems to have come to a conclusion. It is now clearly and visibly overextended. Overextended stocks will come down and TCS has started the journey yesterday and it likely to persist. An immediate day trading short-term target is Rs 1,650, but that is only today’s target or maybe for a couple of days. I would assume that a slide towards Rs 1,500 is very likely. This is the first of the IT stocks that will crack because the virtual vertical rally cannot be sustained and a similar decline is coming.

Q: How would you trade Dish TV, which has been a disappointment for last many quarters?

A: Sell it. It was a big disappointment. The chart suggested that a strong rally below Rs 70 has started cracking and we went bearish on it. At Rs 48-46, Dish TV has not completed its downtrend. Eventually it will go below Rs 40. However, at this point day traders, short-term traders should look at Rs 44 as a modest target, but that is only a stopping point. It has broken all kind of supports, very bearish pattern.

Disclosure: Sudarshan Sukhani has no holdings in the stocks discussed.

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Q: Axis Bank has moved from Rs 1,500 to Rs 1,000 in less than four months. Would you continue to sell it?

A: All the banks have done this and let us not have sympathy for them; they are going to move lower. I am making the point about sympathy because one has to trade the market and trade whatever is available. One cannot get attached to this.

Axis Bank is going lower, for today also if one sees any kind of a minor rally, sell it. There was a small two-three day rally in Axis Bank and that was a perfect selling point and now it is on the verge of a breakdown. Therefore, it is going much lower like ICICI Bank is doing. However, rather than discussing all banks, I would say that public sector undertaking (PSU) banks in general are short sell and Axis Bank for today is an ideal opportunity because it is mildly higher for the last two-three days.

Q: You have a buy on Exide Industries?

A: Exide is one of the rare stocks that is finding strong support; it found support at Rs 120-122. This support can break and it’s anybody’s guess. However, the fact that it has not cracked suggests that there is some kind of strength, some kind of buying. Yesterday also it bounced from that support level. I would be a buyer in Exide assuming that in a choppy market some stocks will go up. It is probably one of the better ones and a midcap. So, all said and done, midcaps have high beta, they can also rally strongly. Let’s take a chance, go long in it. In a choppy, mildly cheerful market this could work out nicely.   

Q: CESC is a part of your sell list today?

A: Yes, it has come after long time. It started a rally from Rs 260-270. CESC went to Rs 370; it stalled there, it made a fairly bearish pattern, it is breaking down, it has already broken down from that pattern so we are now are seeing a continuation sell. It is likely to eventually go below Rs 300, go back to Rs 270 level from where it started a rally. That is disappointing but most midcaps are doing it, so we just accept it as a pattern. CESC is a short sell, assume a target of Rs 300-305 in the next two-three days and probably much lower levels eventually.

Q: How would you approach Lupin and Sun Pharmaceutical Industries today?

A: It’s a difficult question to answer because they are outperformer and both of them are giving us clear signs of being over extended. So, I would be a seller in these stocks. That doesn’t mean they are entering a bear market but the corrections that these stocks could encounter as well as stocks like TCS and HCL Technologies, will be a correction but that correction could feel like a bear market. However, on Lupin and Sun Pharma, I would be a seller.

Q: Technically speaking, do you get the sense that the stocks which have been the outperformer, the stronger set; they could be the more vulnerable set now?

A: Yes, we are, in two different respects; first, stocks that have almost taken off vertically like TCS, Lupin or even like Dr Reddys Laboratories (DRL), they cannot remain overextended. That is a given technical knowledge that they have to correct. The second part is the stocks that are now in trading in ranges; these ranges are going to break down, that is HDFC, HDFC Bank both are on the verge of breaking down. So, there the technical patterns are visible, you do not need a guess of overextension. We know this is a range and we know it is breaking down. So, on both these counts, the trading range breakdowns are easier to manage and understand but the overextensions always come down.

Q: What is the next level to watch on Bank Nifty?

A: The first target for this is 9,000 and 9,000 is unlikely to hold.

Q: Would you say telecom will hold out or will stocks like Bharti Airtel starts correcting?

A: No, Bharti should not correct. It will correct something, in some way or the other but I do not think Bharti is in any kind of difficulty. Those corrections are manageable and telecom itself has not given sign of exhaustion or overextension, nothing.

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