The relief rally seen on Dalal Street on Thrusday was due to the trading range the market is currently in, said Sudarshan Sukhani of s2analytics.com. "Trading ranges have this tendency of creating optimism and pessimism and sometimes they do it in alternate days," he told CNBC-TV18.
He expects Nifty to take out 4800 on the downside on close and sustain there or 4,950 on the upside. One should wait for dips to buy, rallies to sell with small volumes today, suggests Sukhani.
Below is the edited transcript of Sukhani’s interview with CNBC-TV18. Also watch the accompanying video.
Q: The mood was good yesterday; do you think that was short-lived?
A: No it has to be because we are in a trading range. Trading ranges have this tendency of creating optimism and pessimism and sometimes they do it in alternate days. So, in any case it is important to remember the boundaries.
As far as those boundaries are held, this will happen. Some days will be good and we will be cheerful, some days will be on the downside. It is going to go on. Remember 4,800 on the downside must be taken out on a closing basis and then sustain or 4,950 on the upside. Otherwise today we’ll just wait for dips to buy, rallies to sell with small volumes.
Q: You have chosen Axis Bank today?
A: Yes, but among the longs that I am looking at to buy. Axis Bank is the least favourite for the reason that it’s not build any kind of base, it just did a small V-shaped rally because banks suddenly turned up. But amongst other banks like ICICI Bank and State Bank of India Axis Bank has the potential of giving better returns on the day trade, so there is a case for buying here. If the bank index doesn’t start to rally then traders can not take this trade. But if it does then among the banks Axis would be more suitable for the day.
Q: You have a buy on Dr. Reddy’s Laboratories as well this morning?
A: Dr. Reddy’s Laboratories is a far better chart. It went through a correction. It came to Rs 1,620-1,630 where lot of support exists. A stock that is in an uptrend comes down to a level where support exists and then starts bouncing back which is what it did yesterday after staying at that support level and tells that new highs in Dr. Reddy’s Laboratories may not be unusual. This is a better chart to go long in. the difference is that it is not necessarily a day trade because the stock itself is not an active mover everyday but there will be gaps in favour. This is a low risk buying opportunity.
Q: Sun TV Network is in your sell list?
A: I thought Sun TV is finishing its bear market and going to a new uptrend but that hasn’t worked out. It crashed below Rs 300 and it’s now promising much lower lows. At this point I would be short in Sun TV. It’s broken all support levels. So Rs 240 is an immediate target but the promise is that this decline immense, waterfall decline that one is seeing and should take it below Rs 200.
Q: Similar theory for Opto Circuit as well??
A: Yes, Opto Circuit had come in our shortlist earlier also. Yesterday it made new lows, just as new highs should be bought, new highs should be sold unless there is exceptional reason. This is a short sell. The chart suggests that it’s going towards double digits so probably there is money on the short side. We should see follow-through today also and probably to hold it.
Q: Chambal Fertilisers and Chemicals looking bullish on the chart?
A: Chambal Fertilisers’ chart is slightly bullish. It made higher lows, which is the first sign of a stock that willing to go up. Chambal is prone to these moves of Rs 15-20 on the upside and downside because it is at its lower range and making some bullish patterns so it could go Rs 15 up and that’s a handsome 20% on it. Chambal seems to be a buying opportunity. Today one could see a breakout, one could see some gains being build on yesterday and for position traders with a proper stop loss which is there, they could get in; maybe they will get 10%.
Q: Gujarat Fluorochemicals moved well yesterday after a long time?
A: Yes, it was one of those concept stocks that could not do wrong but then it fell and became half. It is now building some kind of a base; not enough but at least there is some sense that a bullish pattern is underway. If it rallies today that bullish pattern would get confirmed. The stock itself was a favourite and there is no reason why it cannot come back. So this is an interesting buy. It’s worth taking for the day. One shouldn’t worry that it was a rally yesterday because some time one will see follow-through for one-two days and that could happen. It’s also worth taking a positional trade in.
Q: You have been saying that this is a range which should not be trading but what does it look it. Does it look like just another pullback attempt from 4,800 base or did yesterday make you relook at that hypothesis?
A: It is not necessary that it’s just a minor pullback because we have fallen 800 points. We are now entering and resting at a strong support level of 4,700-4,800 area, so it’s quite possible that that zone will provide support and at least an attempt will be made to see if this can be a genuine uptrend. It will be or not is a different matter. But it’s not necessary that the markets will stop at 5,050. So we have to have an open mind on that.
Q: How is the chart of ONGC looking?
A: It’s looking quite attractive. It’s found strong support and after that support the bounce back yesterday tells us that this is probably not a flash in the pan maybe a couple of days of consolidation and then a slow inching up is likely.
Q: What about Bank of Baroda?
A: Bank of Baroda is cheerful. There is a sense that Bank of Baroda could be bought into but there is a difference because some of the banks are suggesting at least a short-term rally is in the offing and some others are suggesting that’s not necessarily true. So distinguish between one bank and the other.
Q: Allahabad Bank looked weak yesterday?
A: Allahabad Bank made new lows. It is a short sell and so is Canara Bank. This time one cannot make a generic statement that all banks might go up.
Q: Is the chart of Reliance Power looking optimistic?
A: In fact it was in our buy list this morning. It’s come to Rs 88 and that’s strong support and maybe the results will see it go up and that was gratifying. The charts are suggesting there is more upside here. I do not know about the fundamentals but just on price action now it’s at a point where another breakout should take it all the way to Rs 98 or even Rs 100.
Q: You have been bearish on Pantaloon Retail and the stock has been crumbling but yesterday was a snapback?
A: Yes, it was a snapback. If the market go up then some of these high beta stocks will go. There is a case for buying it as an intraday trader. If somebody wants to trade in it at least for the next couple of days because of that big rally then should be positioned on long side.
Q: Your views on Petronet LNG?
A: Petronet LNG has been a favourite stock. In reality it has not done anything that justifies buying but the fact is that it’s at Rs 120. It’s fallen a lot. It’s inching up. So I would say it’s a high risk trade but I would go long in it.
Disclosure: I have no holdings or interest in the stocks discussed.