In an interview to CNBC-TV18 technical analyst, Sudarshan Sukhani of s2analytics.com shared his reading and outlook on the market.
Below is the verbatim transcript of Sukhani's interview with CNBC-TV18.
Q: Give us a word on how you would approach the index this morning given the global context of how trade is shaping up?
A: Friday was a good day for the Bank Nifty forecast. We thought the Bank Nifty will eventually come down and it did. I am taking the Bank Nifty again because it is a major component of sentiment as well as the Nifty.
The Bank Nifty seems to be suggesting that the bulls are losing control. If that is so then the prospect of a sustained rally from this level in the Nifty is not available as of now. This week the markets should be choppy and we will find out probably that a trading range is developing already and where the market wants to go. Today's trading should be a little careful.
For the Bank Nifty, the trade is to go and sell at higher levels and that trade is intact. It seems that a trading range is likely to break down if not today then in the next few days for the banks.
For the Nifty, 5,950 is our level. Above 5,950 we become intraday buyers but that is all. My view is that markets are likely to be choppy. The trade is available on the CNX-IT that is bottoming out and perhaps traders should focus on that one.
Q: You have a lot of rate sensitives on your sell list today. So let us start with that, you have a sell call for Tata Motors for the day?
A: Yes, Tata Motors failed to cross that strong threshold of Rs 300. That is the first message that it is not able to cross a resistance level that it has marked for itself. If that is so then the rally was just a rally in an ongoing choppy market. From Rs 300, it is quite easy for Tata Motors to come all the way down to Rs 240-250 eventually of course not immediately.
Friday's price action, significant weakness and a breakdown of a small trading range on the downside, all of it tells us that the upside resistance is intact and the stock is likely to find support at lower levels as I explained.
A: Yes, I think so. DLF is now at a make or break level. It is at Rs 230. It has fallen from Rs 275 to Rs 230 where significant support comes. Today that support may hold. If that support breaks then there is a big move on the downside here. It is not just for DLF then, it is probably going to be applicable to most other real estate stocks. We are tracking DLF for the day because that tipping point is available here. So, if DLF is trading below Rs 230, take a short trade, the chances are that not only will it work out for the day, it will also work out for a few more days.
Disclosures: I do not have holdings in the stocks discussed.
Q: There was a pretty smart pullback in technology and you are buying Infosys this morning?
For today, Infosys seems like the most appropriate trade for us to take. Traders could simply buy the CNX-IT. There is no harm in that.
For Infosys, after that significant decline, it is now stemming its fall and at current levels the signs are that the big gap down could slowly be filled. Infosys has done this earlier also. It eventually filled the downside gap. It may not fill it completely but for a short-term trader, there is a rally on the offing and we should take it.
Q: The only midcap in your list is Balrampur Chini Mills, also a buy?
A: That is an interesting idea and the point is that sugar is now forgotten. There was a time when sugar was in the highlights. Sector rotation keeps on happening, the sector comes into focus and then we forget about it and lose interest. But sugar is doing the right thing. Not only Balrampur Chini Mills but also Rallis India earlier and now even Shree Renuka Sugars in a weaker note are suggesting that a bottoming out process is on.
For Balrampur Chini Mills, it is on the verge of confirming a bullish breakout. It has not done that so I thought why not buy it. Sometimes, these sugar stocks quickly run up 3-4-5 percent then an entry becomes difficult. So, yes, we are buying in an anticipation of a breakout but there is no harm. It does appear that sugar is willing to go higher.
Q: HDFC Bank has had a very good run in the last one month. You think the time has come to sell that stock?
A: I think so. HDFC Bank is mimicking the Bank Nifty on a slightly lower note. It is on the verge of a breakdown. Today, the market might open slightly higher as the SGX Nifty suggests but that will not change the scenario. It just means that you move your stops a little higher than what I am suggesting.
If the open is higher then you sell higher also and move the stocks higher. That is a trading method. However, this stock is likely to breakdown from these lofty highs. If not anything it will give us a correction and for a short-term trader that is enough.
Q: You have a buy call on Cairn India today?
A: Yes, Cairn India has bottomed out. It has made the right patterns. For two days, it has been correcting. That is good news because we want to buy stocks that are going through mild corrections, uptrending stocks. Cairn India qualifies on both counts, the trend is up, a base breakout is visible and a short brief correction may be completed. Even if it takes one more day of correction today, it is worth buying because you get better prices. The trend still remains intact and for that reason keep a stop loss in case something goes wrong in the market completely - always keep a stop loss - but expect higher levels from here.
Q: You were making the point about the Bank Nifty and the way it fell on Friday, do you see more pressure there or would you use that slip as an opportunity to start opening up some longs on the Bank Nifty?
A: Bank Nifty is a selling opportunity. It is now on the verge of a breakdown. Assuming that the markets open higher and remain a little bit in a rally mode, we would like to go short in Bank Nifty at higher levels. It is not a buy, it has rallied a lot. After the rally it went into a consolidation. That consolidation is on the verge of breaking down. So that was a distribution that we were seeing.
I would be downbeat on the Bank Nifty. I was downbeat on it last week too and that would continue. It is a matter of trade location where you want to sell it but if you have short positions, continue them otherwise look to go short. The dip is not a buy.
Q: Earlier you were telling us that if this market sticks above 5,950, you would be an intraday buyer. At what point would you advise taking profits out for traders who want to sort of gain in this intraday move?
A: In case, the market remains above 5,950 and we have a dip, we will buy. The level for profits is 6,000. This also tells you that the margin for profits is very limited. We are only looking at small scalping opportunities rather than big gains on the upside. The bigger trade will come if the market consolidates, finally breaks 6,000 decisively or goes below 5,950 and tells us that it is in a correction. This 50 point range between 5,950 and 6,000 will offer intraday scalps.
Q: Dabur India has had a good session in the past two weeks or so, how would you approach that stock this morning?
A: It is making new highs. We want to buy it. Today also if you wait for the first 15-20 minutes, you can see renewed strength in this stock. It is a buying opportunity.
Q: We were talking about technology earlier, how about something like HCL Technologies?
A: I would be upbeat on HCL Technologies, in fact on all technology stocks. It has seen a sharp rally in the last four days. So, we will let it take some consolidation or rest but we want to buy only on a small dip rather than chase prices. The trade here is to go long in it.
Q: This one is going to be news driven this morning but otherwise technically, how is Jaiprakash Associates looking?
A: Technically, it is just on the verge of giving us a bullish breakout. As you said, it is newsdriven, today could be anything. I would be upbeat on this stock. If there was a sharp correction in prices, there is an opportunity to go long, understand the risks but within those parameters, it is worth buying into.
Q: What is the advice on Power Finance Corporation (PFC) now?
A: It is a sell. It was a sell last week also. It came in our sell list and that is happening again. It is not crossing significant resistance limits, it is breaking from small trading ranges, it is a bad chart, you have to sell it.
Q: What about ICICI Bank?
A: That rally is over. It is one of the bigger components of the Bank Nifty. I am downbeat on the Bank Nifty. The only point is that ICICI Bank is an outperformer among the banking stocks. We have other opportunities, HDFC Bank as I explained on the Bank Nifty itself. So ICICI Bank is not a preferred choice for going short but if you want to take a trade, you have to sell it.
Q: What would you do with Hindustan Unilever Ltd (HUL) after more than 20 percent rally last week?
A: We caught that rally. It is a buy but we want to wait patiently. After this kind of a rally, a stock can consolidate for almost a month also. We have seen many examples. So, a person who buys here, gets chopped around. Wait for a small correction and then buy it, make it into a 2-3 day trade, buy at a lower end, the market will define the lower end and then sell on a small rally but every time you buy on a dip, it should give you money.