In an interview to CNBC-TV18, Sudarshan Sukhani of s2analytics.com says that the relief rally for the market has come and gone in the past two days. “The original trend, which is the downtrend is asserting itself,” he said.
Indian benchmarks snapped a five day losing streak yesterday to end 0.5% higher. However, adverse news from around the globe this morning could put pressure on the indices again.
In this scenario, Sukhani advices traders to build on short positions during intraday rallies. “Today’s declines are not an opportunity to cover shorts,” he added.
If the market opens with a gap down today, Sukhani believes the Nifty will race towards the 4800 level or lower.
Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
Q: Indications are that we have got a sharp cut coming this morning. How would you approach it as a trader? Is there any opportunity for a bounce back or is the range for the market opening up again?
A: You described it nicely; the range is opening up again. The bounce back has already come. The first day was mild and yesterday we had a decent bounce back, so we are done with that bounce back.
Now, the original trend, which is the downtrend is asserting itself. Today’s declines are not an opportunity to cover shorts. I would say that intraday rallies should be used to build more short positions. Nothing is certain in the market, but a gap down is a sign that we are now racing towards 4,800 or lower.
Q: Exide Industries is in your sell list?
A: Exide has been a big disappointment. It was one of those concept stocks. It’s been falling consistently from Rs 150, its not having any up day. The Rs 120 has also breached. It now seems that Exide like other midcap peers is going to into double digit. At this point the target of Rs 112-110 seems visible. I think today should be used to build-up short positions. Exide qualifies nicely in that area.
Q: Aditya Birla Nuvo is a chart that you do not like?
A: I do not like it because it was a good stock and it made money on the long side. It is cracking now. I have discussed this before that so many midcap stocks were standing at support levels and they have cracked below it. There is a message here. Aditya Birla Nuvo is now cracking. There is a modest downside target of Rs 770. I would not be overly bearish on it but for day traders ,even this is good enough.
Q: How would you trade Cipla?
A: Cipla is a buy. It is a very good chart, its a bullish pattern and it’s breaking out. I think the breakouts are getting tempered because the broad market is not helping but even assuming that we open 60 points lower, go down, any dip in Cipla should be use to accumulate, add and initiate long positions. This is a positional trade.
Q: Tata Motors (DVR) is a buy today?
A: Apart from whatever is going on fundamentally, the DVR chart suggests that Rs 148-149, it came to a strong support level and from there it saw a bounce. I would be a buyer in Tata Motors'differential voting rights (DVR) even if it falls below Rs 148 today because that is a strong support. This is a buy on dip stock.
Q: Gujarat Mineral Development Corporation (GMDC) is a sell in your book today?
A: The stock cracked below Rs 175 support. All the significant support levels in midcap stocks have been broken on the downside. The targets are so low that we cannot discuss. An immediate target of Rs 158-155 is visible and that is good enough for short-term traders and for swing traders. GMDC’s targets are Rs 110 after the breakdown.
Q: You have got a bullish recommendation on Alstom Projects?
A: Yes, because everything is so bearish that one starts searching for something better. Alstom Projects has a support level at Rs 340. This one hasn’t broken unlike most of the others as we discussed, so I am just hoping that the support will hold. This is not a stock that one should rush on a down day like this. But if the support is holding then we will be buying at the lows. One has to wait till the close to find its holding.
Q: Your views on Gujarat Fluorochemicals?
A: Gujarat Fluorochemicals is a stock that could do no wrong. It’s fallen from Rs 530 to Rs 400 and promises to go to significantly lower levels. There is a freefall here. Yesterday it fell when the broad market was slightly better. We are going to see a follow through on the downside so go and short it.
Q: We will probably start around 4,875. What do you do then?
A: I will wait for 10 minutes and go short or add to short positions. This gap is telling us that the market has probably started another of its downtrend legs, so the trade is on the short side. Somebody who is little nervous on selling after such a gap can wait patiently, wait for a consolidation intraday and then sell it. But the trade is on the short side.
Q: How would you trade Larsen and Toubro (L&T) this morning?
A: Larsen and Toubro needs to be traded on the long side. One has to buy it but one need not buy it today after a 60-70 points gap down and when the enviornment is uncertaint. So it’s far better to watch it and buy it when it either comes to some kind of a level where it stops falling down or where the Nifty stops falling.
Q: Your thoughts on Tata Steel?
A: Tata Steel is in a severe decline. There is a very minor intraday target of Rs 405 but even Rs 400 could be cracked on the downside. It’s a short sell.
Q: Glenmark has been hitting new highs; do you see that journey continuing?
A: Yes, one can go with a target of Rs 385-390. Glenmark could be one exceptional stock that could go up in a falling market but time it well. It’s a good intraday trade, even today, on the long side.
Q: What would you do with Titan Industries?
A: I would buy Titan because the trend is up but today is not a good day to go and buy Titan or other concept stocks. The trade still is on the long side but today is not an appropriate day.
Q: How do you trade the fertilizer pack and Chambal Fertilisers and Chemicals in that?
A: Chambal Fertilisers after a big decline from Rs 90 to Rs 75 is giving signs of life and one would like to buy it. Yesterday it had a big in it. So the idea should be to buy it on some kind of a correction, which we will get today. It is worth buying, there is a tight stop loss, go long. Some of these things can go up and give 5-7%.
Q: What about Power Finance Corporation (PFC)?
A: Power Finance Corporation is a short sell. It’s a short sell since Rs 170-180, when it cracked its support levels. It is not showing signs of relenting or stopping this decline. I do not know where it will land up but it could easily go to Rs 100, maybe not today. The near-term target could be Rs 135-137 even Rs 130.
Q: If you start shorting around 4,875 and your target is 4,800, that’s not a whole lot of purchase on the way down, are you then saying that your targets are even lower?
A: Yes, because once we see momentum on our side 4,800 is the point where I assume that some support comes in. It’s not necessary. It could be 4,750. It could be 4,700. So this big momentum today tells us we should be on the short side then we will see what happens.
Disclosure: I have no holdings in the stocks discussed.