In an interview to CNBC-TV18 technical analyst, Sudarshan Sukhani, s2analytics.com shared his reading on the market. He warns that May series will be choppy and momentum seen in April may not continue.
"It is very unlikely that this market will keep on going relentlessly up. So, May is going to be a difficult month to trade. We will find out in this month whether that old adage, sell in May and go away, works out. I think it will," he said in an interview to CNBC-TV18.
Nifty may see 6000 in May; betting on TCS: Angel Broking
Below is the verbatim transcript of Sukhani's interview with CNBC-TV18.
Q: How is the pitch set for the new series?
A: So far it is fine. We are seeing strong momentum and we have been suggesting buying, maintaining long positions, taking profits, reentering, all of it to catch this upmove. May is going to be different from April. I do not see this momentum continuing in the same force. That suggests that market is likely to be choppy. We will also see corrections.
It is very unlikely that this market will keep on going relentlessly up. So, May is going to be a difficult month to trade. The much larger part is, was this a correction in an ongoing downtrend. I would suspect that is so. We will find out in this month whether that old adage, sell in May and go away, works out. I think it will.
Q: You are buying some of the stocks, which have shown momentum of-late like Tata Motors?
A: We are short-term traders and momentum is on the side of the longs. Tata Motors at Rs 285 has just broken out yesterday. Yesterday’s breakout could easily be because of settlement considerations.
However, assume this breakout is genuine, if not anything there is a scalping or a short-term trade here on the long side. The market has not stalled. I am saying the chances are there. So, Tata Motors remains a buying opportunity on a breakout. When the market reaches its top, breakouts become a suspect. So, traders must keep stop losses.
Q: You are not so bullish on Tata Chemicals?
A: Tata Chemicals has done exact opposite. It has been rallying and rallies get stalled and stopped. It is suggesting that it is making a long consolidation from which it is going to breakdown on the downside. We are selling at the top, if this works out today then this is a trade that can easily be carried on. So, it is not just a day trade, it is something that can look for a longer period of time on the short side. I would be fairly bearish on this stock.
Disclosure: Sudarshan Sukhani has no holdings in the stocks discussed.
Q: You are selling Tata Consultancy Services (TCS)?
A: TCS is making new lows for this downswing consistently. I thought the IT index would be bottoming out. That has not happened, it is underperforming still. Therefore, the fact that yesterday was a big down day, suggests that we can see downside momentum continuing when Nifty is expected to be choppy. So, stocks in the IT sector will not get any tailwind from the Nifty. Expect lower levels, not just in TCS but also in the other large IT stocks, so go short.
Q: You are buying Reliance Industries today?
A: Every technical trader should be looking at Reliance today. Reliance was in a trading range for the last one month so it did not participate in the Nifty’s rally. On Thursday it broke out. I have explained that these breakouts could be suspect because some of the breakouts that occur when the Nifty is reaching a crescendo, a top of some kind, those breakouts may or may not work out. However, the trade is still to be long. If it works out, we want to be there otherwise at this point we should be prepared to get stopped out of some of our long positions.
Q: Adani Power comes back in your buy list?
A: It is a much better chart. It has made double bottom, a head and shoulder, a cup and handle pattern, whatever one call it. Sometimes chart pattern can be subjective and they can be interpreted in different ways. However, the message is it is bullish. Adani Group is giving signs of life; all the three charts of the company are relatively attractive. So, buy this, not just a short-term trade, it can be a position trade also.
Q: How would you trade Lupin?
A: Lupin is making new highs. It is in the right sector. We saw Dr Reddys Laboratories do remarkable things and Lupin is doing in the same vein. It is a buying opportunity. Yesterday it gave away some of the intraday gains. Today it should be able to capture them again. It is the best of the lot. Wait for the first 15-20 minutes, if it shows strength then go long.
Q: How would you approach the Nifty?
A: Today should be fairly cautious. I would be a buyer in the Nifty; the momentum is still on the long side, but only on sharp dip. I suspect today we will get sharp dip sometime during the day. That is the trade we want to take rather than rush and take whatever comes by. That is the best trade, buy on a sharp dip and try to exit partly at the close.
Q: Would you be looking at any point for signs of the market tiring out to explore short positions and what would those signals be?
A: At current levels where there is so much resistance, it is worthwhile looking at short positions. The signs would be once the market suggests that the momentum is now coming down or rather falling, waning. That would happen if the nifty were close lower for at least two successive days and that will give the clear sign. However, today is not that day.
Q: What have you made of NTPC's recent upmove?
A: NTPC is now bottoming out. That had so much overhead resistance that after yesterday’s big move there is no buying opportunity, one has to wait for the stock to correct and then only enter it. NTPC is not something that is going to fly away. Therefore, with limited upside take a pause, buy on a significant correction. There is still something that one can get.
Q: How would you trade Ambuja Cements?
A: Ambuja Cements has a very attractive chart. It is suggesting that a sustained upmove has started. It was a V-shaped rally and this rally could continue to Rs 200. That is not our day trading target. That is much more modest. I am saying that there is a lot of push that Ambuja is getting in terms of strong trend.
Q: Your views on Hexaware Technologies?
A: It is a sell. Hexaware has done its bit, it is now giving all signs of a breakdown and the largecaps are also doing the same. Hexaware is a short sell probably much lower than we imagine.
Q: How about SKS Microfinance, which corrected a bit yesterday?
A: I would be a buyer in SKS and the reason is that it's not broken out but is showing some signs of a base building exercise and that is always good news. So, while if we buy now we are buying in anticipation of a breakout. There is no harm because the risk is very limited.
Q: How about Zee Entertainment, which had a good day yesterday?
A: Zee seems to be coming out of a correction again. I would be careful going long in it today. There was a big upmove and there is a lot of overhead resistance in the Rs 225-230 area. Therefore, the stock should be bought only when it corrects and all stocks corrects.
Q: How would you trade Cairn India?
A: Cairn India is a much better chart. It is far superior opportunity to go long into. It is building a base, breaking out. It had a small base breakout, a larger one is happening. Go long here.