The Indian market witnessed a decent rally on Thursday. In an interview to CNBC-TV18, Sudarshan Sukhani of s2analytics.com says there is a strong resistance band in the 5,730-5,750 area. "The Nifty needs to cross that zone for us to say that the uptrend, which we were seeing for the last two months, has resumed and the correction is over," he adds.
Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.
Q: What is your call on the Nifty now?
A: Yesterday, I had suggested that if the Nifty is closing above 5,700 then aggressive traders should take a long position. We closed better than 5,700. But the interesting part is that there is a strong resistance band in the 5,730-5,750 area. It is difficult to identify a number and it’s not needed. It’s that zone.
The Nifty needs to cross that zone for us to say that the uptrend, which we were seeing for the last two months, has resumed and the correction is over. We are above 20-30 point short of that level. It would happen today and it may not happen at all. It’s strong resistance. Once 5,750 is crossed then long positions, not only by short-term traders, but also by position traders is justified on the Nifty and the Bank Nifty. We should not track the Bank Nifty for its own levels; we should follow it by using the Nifty.
Q: You are bullish on Titan Industries?
A: Titan has been making a one way move. Its part of favoured FMCG, fast consumer goods sector, the broad area. It has done very well, a small correction was done with, it crossed the resistance levels, making new highs and those new highs continue. Buying new highs is always a difficult proposition but as we have seen many times in this market, good stocks are being rewarded by making them richer in terms of valuation and price.
Titan qualifies as a stock that’s likely to move higher. So, I think it should be a day trading as well as a swing trading opportunity. Position traders should wait for a correction whenever it occurs.
Q: You have chosen to pick up Dabur from the FMCG space?
A: I am hoping that some of the sheen that ITC already has will rub-off to Dabur, which is lowly of the three big FMCGs Hindustan Unilever, ITC and Dabur. Dabur has gone through a small correction that was essentially sideways. It does appear that it remains in favoured sector, there is more upside here.
In a choppy market or in a market that inch up, the strongest sectors will remain strong. There is no sense in buying infrastructure. There is much more sense in buying HUL, ITC, today’s pick Dabur and similar stocks.
Disclosure: I have no holdings in the stocks discussed.
Q: You think ONGC is about to make another foray into Rs 290 zone?
A: That’s more of a probability because it comes and then stops at Rs 275-274 where it has made a repeated support level. It is very close to that support but the trade here is narrow, in the sense that it could be Rs 10-15 in ONGC which is okay, which is still 5 percent. So, the move here is that the stop is visible to us. As a trader, we know when we are wrong.
If ONGC slides below Rs 274, it is making a much deeper correction. If it doesn’t, this market is seeing many stocks bounce off from support and go higher. ONGC could do that. It’s a trade worth taking if the Nifty remains steady.
Q: Will you sell ACC today?
A: I will sell it for the day. It’s also a positional short. You could buy puts, you could sell calls, take a low risk short trade. Its not ACC, it’s the entire cement sector, they have done their bit and the next rally will of course come but not soon enough. Today, ACC is likely to see follow-through on the short side.
Q: United Phosphorous is also a sell in your book?
A: United Phosphorous rallied from Rs 105 to Rs 135, a 30 percent rally. That was a time when midcap stocks could do no wrong. After that it made a distribution and broken down from distribution.
If the market actually lifts off, I would be very surprise if it does that but if it does that, we will all be long. If it lifts off then some of these shorts may not work. Otherwise, United Phosphorous is going for a deep correction.
Q: You have a sell call on GAIL?
A: GAIL has made a bearish head and shoulder. It’s a confirmed distribution pattern and broken down from it. GAIL has never been a favourite. It’s been coming in our sell repeatedly. Small rallies, big selloffs and that pattern remains.
So, GAIL is a short sell, probably a positional short sell and also a hedge. If you have long positions, you can sell GAIL and have a hedge. It’s one of the weakest stocks in the universe.
Q: How would you approach Indiabulls Real Estate today?
A: It’s a buy, as are most midcap stocks that we are discussing but I wouldn’t buy it. There is one thing to say that this is a buying opportunity when it comes to a level I am comfortable with I would buy.
But Indiabulls has rallied, it had made a flag yesterday, it did a very decent breakout and came out of that flag but given today’s likely choppy conditions we want to wait for a correction or a small dip before we go and buy it. It is obvious that the trade has been on the long side.
Q: Where are the stop losses kept on long trades which might have been initiated yesterday and below what levels would you consider taking a short trade again?
A: That is a fair question. We took a long trade yesterday since we are aggressive traders. The stop loss for that on a close only basis is 5,690 on the cash Nifty. Suppose the Nifty suddenly drops all the way by closing to 5,650 then we do not want to miss out, lose an additional 40 points.
If we get a sense that the markets are drifting down we may get out earlier. Once we get out of a long position that would also be a sign to start initiating short positions. This market must show momentum on the upside otherwise what we have done is bounced to the top of the trading range and come down.
Disclosure: I have no holdings in the stocks discussed.
Q: How would you approach UCO Bank today?
A: It’s a buying opportunity theoretically. I wouldn’t buy it unless the Nifty decides to move up I think this whole thing is working on the primary index rather than individual stocks, all of them will come down if the Nifty doesn’t go up. But on correction UCO is a buy. It’s not a short sell.
Q: What about Amara Raja Batteries?
A: Amara Raja Batteries is an excellent stock. Yesterday it had a very big run-up, very big upmove. If there are intraday consolidations I would buy it even then. It’s a stock that is showing no signs of stopping and it’s likely to do much better than it has done. It’s a buy without qualification.
Q: Would you buy Dish TV on the dip you saw yesterday?
A: I would not sell it which is why I qualify it as a buy. I can also give a target and stop loss and other things but I wouldn’t buy it. It’s now doing the same distribution. We want to find out whether it comes out on the top or the bottom. So, at this point just watch it.
Q: What about India Cement?
A: It is an exception to the largecaps that I have been little downbeat on. India Cement had a good run yesterday and that should continue. Just like Amara Raja, India Cement is probably an exception and a buying opportunity and intraday consolidation would justify taking a long position here.
Q: What is your call on Tata Motors?
A: I am upbeat on Tata Motors. That doesn’t mean it will go against the Nifty but if the Nifty begins to move up Tata Motors or Tata Motors differential voting rights (DVR), choice is yours, would outperform the Nifty.