Sudarshan Sukhani of s2analytics.com believes the Nifty is all set to break its 100-point trading range and move above the 5300 level.
“For now, what we are doing is taking up the trading opportunity that we have and setting it up on the long side,” he said in an exclusive interview to CNBC-TV18.
However, he adds that a strong buy signal emerges only once the 5400 level is broken.
Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
Q: After yesterday’s rally, do you see more potential for upside?
A: It is anybody’s guess. Chances are that that the market takes out that very narrow range of 100 on the upside today and the Nifty is likely to be above 5,300. That is a buy signal. So rather than make an estimate of where the Nifty is heading, what we are doing is taking up the trading opportunity that we have and setting it up on the long side.
Once we cross this 100 point range on the upside, we have then the 5,400 barrier for the Nifty. A real buy signal emerges when we cross 5,400. For all I know, we could do that and we are going to be long. But for this point, it is very difficult to make a call.
Q: Power Finance Corporation (PFC) did quite well yesterday; you think it is good for a buy?
A: I think it is good for a buy because it is also making a fairly decent bullish pattern and it corrected from Rs 250 and came down a lot. So there is a lot of headroom even to reach its earlier highs. With regards to financials, we had banks coming on the buy list and that now seems to be working for non-banking financial companies (NBFCs) and others.
PFC’s chart suggests that a position trade for even a day trade is worthwhile. There is limited downside and the first target of Rs 205 and then if that is broken then a significant rally could come about. So it is a buying opportunity.
Q: What about something like a Dish TV?
A: Dish TV is a buy on dips trade. We had a very big decline after an initial rally, then again a rally and then a decline. I am assuming that the rally is intact and the decline was a correction in what is now a new uptrend. If that was a correction, then yesterday it saw good gains and the chances are that slowly inch-by-inch, Dish TV is going to cross those levels and then move higher. It is probably going to go to Rs 68 then cross and touch Rs 70 level and if it crosses Rs 70, it is in a very big bull trajectory.
These are all assumptions but we buy on assumptions and probability. This is a good location because we are buying after a correction, so we are buying at a very low price; I think Dish TV is a worthwhile trade.
Q: How about some of the quasi realty stories like Bombay Dyeing?
A: Bombay Dyeing has been a favourite. It went through a very mild sideways correction. It did give up a few points but that was very negligible. After that it rallied yesterday, the chances are that strong stocks keep on rallying. We have the example of Bata, which just doesn’t stop, although it is not exactly the same but similar. Now with Bombay Dyeing the chances are it is going to make those new highs for this uptrend. It is in a bull market so it is likely to make new highs in a bull market. It is an out performer and has been making new highs consistently, so I think now Bombay Dyeing is ripe for another buy and another breakout.
Q: What is your view on HDIL?
A: We have spoken of HDIL earlier and I explained that it was in a trading range and it was coming out of that range and therefore it was worth buying. It was probably one of the better stocks in the realty sector in terms of charts. That seems to be working out for HDIL. It has come out and has come out of the range on the upside with a lot of momentum. When stocks are in a trading range and they come out of it with good momentum that is not the end of it. That momentum is probably telling us there is more to come on the upside.
There has been a very decent decline from Rs 125 to almost Rs 80-85 for HDIL. There is a lot of headroom for HDIL to go up before it encounters resistance between Rs 90 and Rs 125. So I would say that for intraday traders also you keep track of HDIL and go long whenever you get these intraday opportunities and it is a long candidate for position traders and swing traders.
Q: From the banking space, you continue to back Axis Bank?
A: Axis Bank has a relatively better chart than ICICI Bank and HDFC Bank. For the last four-five days, it is finding support at that lower level of Rs 1,160-1,170 and bouncing back from there. That usually suggests that a small base has been formed at the lower end and the next bounce should take it back to Rs 1,250 and probably that is a good trade for the short-term trader. We will see what happens after that but there is some money on the upside. For a stock like Axis Bank, the risk on the downside is limited if the market is going up. It is a good trade to be in and you could probably get Options also here.
Q: The only sell in your list today continues to be Jain Irrigation?
A: Yes, because the market has given us a message that it is willing to cross 5,300 and it is at seven day high, so we cannot ignore that momentum message from the market. So bias is on the long side. Jain Irrigation is a poor chart. It has come on my sell list again and again and it has been falling. It is a very big disappointment. I thought that after it touched Rs 110-115, it would keep on going up but it simply collapsed. It is now making a bearish pattern and that pattern may not be broken today or in the next few days but if it did then it is looking for much lower levels. So even as a hedge, even as an independent short, it is probably a sell on rally stock.
Q: Looks like we will start above 5,300 this morning, will you open a long straightaway or wait to see the first few minutes of activity?
A: Straightaway means wait for the first three-four minutes, that is a cooling off period but I will not wait for any levels or thresholds. This market has broken out; we are just going through a formality of crossing 5,300 today. So I will be opening a long position. Now we will have to let the market say whether rewards will come or not.
Q: A lot of the Anil Dhirubhai Ambani Group (ADAG) stocks were active yesterday, today they are softer, how do you trade something like Reliance Infrastructure?
A: You don’t buy it, no matter what happens; Reliance Infra has a very poor chart. These are periodic rallies in ADAG stocks. There are two points; first independently if I were to look at it, I would not buy it and second, there are so many opportunities so there is no reason to go for Reliance Infra anyway. ADAG stocks are volatile and to my sense they sometimes give the impression of being managed also. It is not worth going there.
Q: How about something like Titan?
A: Titan has been going through a minor correction. Yesterday, the patterns it made suggests that the correction may well be over. It bounced from the lows that it made yesterday which the Nifty also did. But if this correction is over then Titan should again resume its upmove and cross Rs 250 threshold. So Titan is a buying opportunity.
Q: MindTree had a good move post results yesterday, how is the chart looking there?
A: MindTree’s charts are good. The trend itself is upbeat. For me, it is very difficult to buy after a big move has already come. So while the trend is up, the chart suggests buying. The best way is to wait patiently and that means many days of patience not just half day patience. When the stock consolidates, that is when a new trade should be taken. But there is sense in going long in the stock.
Q: What about Sintex Industries, that is such an iffy looking stock, goes up, comes down, is it showing you a Jain Irrigation kind of pattern or you are more bullish there?
A: Absolutely right, it is that Jain Irrigation type. Both stocks gave signs of life and we thought the worst is over. For Sintex also, it is more on the downside than up; it rallies and then falls more. It is at support levels, which if broken will suggest bear market for Sintex while the market can do anything. This is not a buy, it is a short sell.
Q: HOEC was a big star yesterday, more to that 8% rally?
A: Yes, much more. I think HOEC has come out of a very attractive bullish pattern and it has also corrected a lot. After a correction we had a bullish pattern that is a reversal sign and then there is a lot headroom before the first resistance is encountered. So HOEC is a buy and I think that the earlier highs of Rs 150 should be easy to reach. That is about 15% from here.
Q: How about Max India?
A: Max India went up on news. Now anything that goes up on news rallies, on the charts it becomes a buy. But here, whether we want to buy it now, whether we want to wait for a consolidation is the trader’s choice. It is always wise to wait patiently for that rally to enter a consolidation otherwise we buy and it starts consolidating. So the trend is up, it should be bought into but with some patience.
Q: This morning there will be some excitement on HCL Technologies, relatively it has been an out performer but in absolute terms what is the chart looking like?
A: For HCL Tech the charts are suggesting that a trading range in HCL Tech is likely to breakout on the upside and if that happens, it is going to distinctly outperform Infosys and TCS but probably Wipro also, very attractive charts. I would say that for a person who is looking for an entry in the IT sector; here is a stock that would go up while the others languish.
So for day traders, watch HCL Tech not just for today but for most days now in the coming few weeks and for a positional traders, take a position on the long side and sit tight.
Q: Is it looking increasingly likely that level which the market has been threatening to break 5,180-5,200 that may hold out this series?
A: Yes. It is looking increasingly likely that that may be the final low for the correction that we are now seeing. It is not just the breakout of 100 point trading range; it is also a larger chart pattern that could suggest that the 5,600 to 5,100 move was a correction. As we keep on breaking resistance levels, the correction is probably over. But we need to take out 5,400 to say that is behind us.
A: Tata Motors is a buy. I don’t think there is any confusion on that. The targets of Rs 325 are likely to be met and exceeded. So it requires a certain amount of courage to buy a stock that is making new highs or on the verge of making lifetime highs. That courage is justifiedn, you can buy the DVR if you want or buy the main scrip.
SBI is probably one of the likely underperformers in the PSU bank but if the market goes up, it is likely to move up. Probably the midcap PSU banks are better choices, Vijaya Bank, Dena Bank and Canara Bank. But the stock is a buy.
Disclosure: I have no holding or interest in the stocks discussed.