Yestereday, the Sensex dropped 120 points to end the day below the 20,000-mark and the NSE benchmark Nifty closed down 33.80 points at 6048.50.
Sudarshan Sukhani, s2analytics.com,In an interview to CNBC-TV18 said, assuming Nifty is in a trading range and it is going to be chaotic for the market, there are no trades in Nifty except for intraday traders.
For intraday trade, if the Nifty rallies 20-30 points then sell at that point and if there is deep correction, then that is the buying point, he suggested.
"Nifty is now in some kind of an overbought position. It will need 5-7 trading days to dissipate that condition," he added.
Below is the edited transcript of his interview on CNBC-TV18
Q: It looks like there maybe a bit of a pullback on Nifty this morning. How would you trade it?
A: I would consider that to be just a pullback. The trade in the Nifty is to assume that we are going to be chaotic and we are in a trading range. Therefore the Nifty trades are not available except for intraday trading. Intraday of course, we trade the extremes. If you see the market rally a bit 20-30 points that is a selling point and on the downside a deep correction is a buying point. That is something that only short-term traders should attempt.
However, beyond that the Nifty does not offer any trade. We have seen a very strong rally. Our charts tell us that the Nifty is now in some kind of an overbought position. It will need 5-7 trading days to dissipate that condition.
Q: There are lot of result candidates in your buy list today. Let us start with Havells India.
A: Havells is now having a mild correction and that correction is stopping at a strong support level. It is anybody’s guess where this will go, but I would say that a lot of stocks have surprised on the upside in terms of price movements and Havells could easily do that. I would be a buyer in Havells. As usual, keep a stop loss. The sense is that the mild correction has already taken place here.
Q: You are bullish on Sun TV Network?
A: We know Sun TV has been a consistent out performer. From last few days it has been in a very narrow trading range and that range seems to be getting resolved on the upside. The advantage of taking these positions is that if the news is satisfactory then the gains are significant. If it is not, then you have to get out,
However, I am assuming that in markets that are uptrending, in stocks that are uptrending, good news is probably anticipated and is likely to help it push further. We saw Hindustan Unilever (HUL); it was already Rs 100 down. So the market was expecting something disastrous and that is exactly what happened. Here Sun TV is something that is moving up consistently.
Q: You are selling Industrial Development Bank of India (IDBI)?
A: Yes, it is a sell. The banks have done their bit. Most Public Sector Undertakings (PSU) banks are still buying opportunities. Unfortunately, IDBI does not come in that category. It is going through a process of distribution. Yesterday, it fell below the support level, so we are looking at a mild correction.
Banks are not in a bear market. We are only trying to trade corrections that are already ongoing, on the downside. Therefore there is a modest target and modest anticipation but traders should take advantage of that.
Q: You are also cautious on Ashok Leyland?
A: Ashok Leyland seems to have done its bit; it rallied significantly and then it went into a huddle. While the market was going up, it was in a trading range for two months. It has dropped down from that trading range. This is a bear market stock now. It is not going to go up in a hurry.
Something is going on in Ashok Leyland. We are selling almost at the top. If this works, traders should maintain their positions on the short side either by selling Calls or by buying Puts and keep on riding the trend down. This is a bad chart in terms of bullishness.
Q: You have been bullish on telecom. Today, you are buying Idea Cellular?
A: Yes. Telecom is a dream sector. We have already seen how fast the rally has been. All we are seeing is pauses and then renewals of this rally. If something is going to go up today, then that could easily be telecom. Rather than Bharti, Idea is in a narrow range. Narrow ranges usually get resolved in the direction of the original trend. I would assume the original trend here is up.
Traders should watch patiently for the 15-20 minutes after the opening. Whenever they see a mild breakout from today’s morning range, go for it. Not just in Idea, but in fact Reliance Communication and Bharti Airtel as well, although Idea is the preferred choice for today.
Q: You are bullish on Aditya Birla Nuvo?
A: I have been bullish on it for sometime now. It has been a very nice stock and then it did not do anything for months. Now it has got its act together. If you look at the long-term chart for Aditya Birla Nuvo, it is giving us an excellent positional trade. The stock price could easily go from Rs 1,170-2,000, which means a significant outperformance. That is the long-term story.
A stock that is likely to move so much higher is a short-term trading opportunity whenever it corrects, whenever it consolidates. Aditya Birla Nuvo has just completed a consolidation, so the next big upthrust is coming. It could start today hopefully, or it could start tomorrow, but it makes sense to be positioned and be ready on the long side.
Q: How would you approach the index?
A: The index is likely to be choppy on my reckoning. We are up 20 points at the pre-opening but it is difficult to know if it will sustain. The Nifty unless it reaches extremes when a counter-trend trade is taken. If it goes up 30 points try to sell it. If it goes 30 points lower try to buy it only as a day trade.
Q: What about Hindustan Unilever (HUL)? Signs in the pre-opening are not encouraging at all. Is it too late to sell, or can you still sell it?
A: I think it is still possible. Obviously the risks are much more. But an immediate target of Rs 440 is likely and an eventual target could go all the way down to Rs 400.
Rs 400, is a location where there is so much support. It is probably a place where you buy without asking, but as of now there is more downside here.
Q: Is Dish TV India looking wobbly?
A: Perhaps it is looking wobbly but because I am so upbeat on it, I get biased. To me yesterday’s decline has not broken any support levels. That support is at Rs 70.
I would be a buyer in Dish TV. It is a very high-risk trade, but the idea still is if we see intraday strength, I would go long in it.
Q: How about Housing Development and Infrastructure (HDIL)?
A: HDIL is still a buy. It has not given us enough signs to say that the uptrend is over. We had a bad day yesterday but that happens when markets go choppy at the top, then then momentum stocks get beaten down on any small downtick. However, that could be a one-off occurrence, so HDIL would be a buy.
Q: Is the run done on some of these Oil Marketing Companies (OMCs) like Indian Oil Corporation (IOC)?
A: Absolutely. IOC’s chart is like a parabolic rally; straight line advance. It is not sustainable. The wisest course of action in this is to avoid it. Although, purely on the charts we have to say you buy on a dip, but that dip would be very-very deep now, not current price levels. Ideally, just stay away.
Q: Rural Electrification Corporation (REC) slipped off a little bit yesterday. Do you see more downside?
A: No, I would be upbeat on REC. This is a correction. Yesterday, a lot of these midcap stocks had deep corrections. So let it slide, there is a lot of support at current levels. Any momentum change in REC should be used as a buying opportunity.
There could be an eventual target of Rs 255-260. All the trades we discussed should be taken in context that if the Nifty is getting cheerful then the buying is worthwhile.
Q: You are buying Kotak Mahindra Bank?
A: Kotak Mahindra Bank presents a confusing picture. There are selling signs and there are buying signs including the fact that it rallied yesterday. On balance if somebody wants to take a trade in Kotak it would be a buy, but because I am a bit confused I would simply avoid it.
Disclosure: I have no holdings in the stocks discussed.