The Nifty held on to the 5,250-mark for the better part of Wednesday and closed at 5,239 levels. In an interview to CNBC-TV18 Sudarshan Sukhani of S2analytics.com said, the trend for the market for the month of May is on the downside.
He expects the Nifty to break 5,200 levels and drift lower. "The trend is downward, so I would suggests to short today," he added.
Below is the edited transcript of the interview with CNBC-TV18's Mitali Mukherjee and Reema Tendulkar Also watch the accompanying video.
Q: How are you approaching the index now and what seems like the best instrument to trade this range bound market?
A: My sense is that we are still moving on the downside. Yesterday we rallied in the morning and as I had suggested we kept on moving down after the rally that worked out simply because the trend is down. Therefore it is easier to suggest trades in the direction of the trend. What happens is probably we made a high yesterday at around 5,300 just a little shy of that and we are likely to break 5,200 and go lower. So, the trend for May so far remains down.
It is true we are in a trading range but the push is again on the downside. The gains maybe small or they may become larger later on, but I am approaching the day to take another short trade.
Q: Cipla did well yesterday; you would buy it after the run up?
A: Yes, Cipla has done well. Cipla is more in a trading range; it goes down, finds support just a little below Rs 300 and then rallies. Currently it is in a rally. So we want to go into the stock at least to the top of its trading range, which is about Rs 330-335 and we will still have the advantage. If it crosses Rs 335 then it breaks out of that range and that gives us more movement on the upside.
Cipla’s chart pattern suggests that it is bottoming out, it is probably willing to go higher. I think today Cipla should be on most people’s buy list because likely gains are going to come and fortunately it is not so affiliated with the index. It is a pharmaceutical company that has its own dynamics, so it should work well.
Q: You think HDFC Bank will be resilient; you would be a buyer there?
A: Yes, I would be a buyer there, more because the buying list is very small now. While short selling ideas are coming on the charts very quickly and there are number of them, so we have a choice as to when we want to go in a choppy market and we want the buys and sells to be balanced. At this point of time, the list of stocks showing chart patterns that I can use to buy is small and HDFC Bank comes in it.
So rather than saying I am expecting big gains in HDFC Bank, I am expecting that HDFC Bank will outperform the market. It is a stable security, so I would prefer to go long in it. In case the market does turnaround and go up, HDFC Bank should be an out performer even then.
Q: Your favourite on the short list has been Larsen & Toubro (L&T) and that remains so?
A: Yes, you are right, that remains. The stock is a disaster; it is falling, it is now at Rs 1,200, it promises to come to Rs 1,000 again. It did that when we were in a bear market and L&T is in a bear market no matter what the market does. But before any serious buying can take place, we have maybe a 20% decline here and for short sellers it is an excellent opportunity. One could take a positional trade here, not just for today. You could buy Puts for L&T and then just wait patiently. Together with BHEL, L&T is on the downside and the downside is likely to continue.
Q: Are you beginning to see any signs of a rebound on Titan’s charts -you are buying that today?
A: Yes I am buying Titan, it is a good chart. It made new highs on the back of news and then suddenly we thought people won’t buy gold jewellery etc. That was a dip, it was a decline. We want to buy good stocks on dips and Titan perfectly qualifies for that. Yesterday, we saw decent gains those gains came after a narrow range and a breakout from that. This is a pattern that suggests new highs are coming.
So Titan is a buy, we can see follow through today. If suppose the markets start turning around during the day, Titan should be one of the biggest beneficiaries together with Cipla and HDFC Bank, so it is in my buy list. For people who want to make positions, buy Titan, hold on to it and you will see very decent gains even in a market that retreats.
Q: You would be a seller in VIP, what is the kind of downside we can expect?
A: VIP’s downside is Rs 80. It is falling and not stopping. There are number of stocks that are telling us more lower levels are coming. This group is largely in the midcaps but if the midcaps are going to fall and fall, the largecaps, the Nifty stocks cannot be far behind. Maybe they won’t fall as much.
VIP’s target is still a good 15% lower than where it is now and with very little risk. It keeps on breaking support levels, it did that yesterday. So I would assume that the slide that it is going to start possibly, should take it to Rs 80.
Q: You would also sell Jain Irrigation for the day?
A: I would sell Jain Irrigation. The stock rallied one day earlier, which is why I keep on warning viewers not to rely on a one day rallies because they mean nothing. Yesterday, Jain Irrigation fell and retreated from the start. So the rally itself was erased in just a day. That tells us that the rallies are not sustainable.
Jain Irrigation’s trend is clearly down. The target is Rs 81 for a short-term trader and maybe even lower. This is not a stock we want to buy. Post a one day rally, it is a sell on rallies and it qualifies as a trade for the day. Again it is a positional trade, you could hold on to it and make some money on the downside.
Q: It is looking like it is going to be a sticky kind of start, what is the very near-term downside risk for the market you would say?
A: We have had this support level of 5,150-5,200; the chances are that support will be breached. I am not sure if I would use the word risk, I would say that is a reward for short sellers, a target of 5,000 seems visible. But long only players need to understand that the markets can slide 200 points from here.
Q: Sun TV did well yesterday, how would you approach it now after yesterday’s run up?
A: I would buy it; I have been upbeat on Sun TV for quite some time now. Sun TV has completed its bear market; it is now beginning a new bull market. It is in the right sector at least at this point of time and yesterday’s gains should be built into. If we do see weak markets, we have to be patient and buy the stock on dips but we should be going long in it. An immediate target of Rs 320 is possible.
Q: Ashok Leyland was quite weak yesterday; it was down about 5%, how was the chart looking?
A: Ashok Leyland suggests that it is going through a distribution, making an intermediate top. This is a short sell, at least in my charts. The targets for this are Rs 28, probably even lower. So if there is any weakness in the morning, traders can look to sell after first 15-20 minutes of trade, put a stop loss and go short here.
Q: Some newsflow expected around IGL but the stock itself has put on some weight, it is up about 6% over the last three days?
A: Yes and irrespective of the newsflow, the chart suggests that when a good stock goes through this kind of a sharp gap down decline and then stops falling, which is what IGL has done then that is at least a short-term support that has been developed. I am assuming that the newsflow will probably support this theory eventually and I can expect IGL to have at least a relief rally if not more.
So buying is justified in IGL because IGL is not a volatile stock and newsflow can sometimes cause unnecessary volatility. It is more of a positional trade on the long side. One would want to buy it for a few days rather than do an intraday on it.
Q: How about something like an Idea?
A: Idea has the same characteristics as that of IGL. It fell on the back of news and all sorts of background stuff. It stopped falling and that is all I can say for the stock. If it has stopped falling, it is either building some support or it will renew its decline. We have to assume that Idea and Bharti are both building support levels.
So Idea, at least for the time being is a buying opportunity. It is a high risk buy but you keep a stop loss. If you are right then we are buying at the lows with a target of Rs 84-85 for the stock. Don’t be very ambitious but the attempt should be to buy it if support holds and if it starts inching up.
Q: India Cements as well is on your radar today?
A: India Cements is a horrible stock. It is a short sell and it was a short sell when it was Rs 105 and since then it has given up 20%. So it is consistently coming in my sell list. Even now it is a sell. I can expect Rs 82 on it on the downside, even Rs 80 or lower.
We don’t want to buy it. In fact the trade should be to buy ACC or Ambuja and sell the other cement companies. India Cement of course is the most appropriate for selling.
Disclosure: I have no personal holding in any of the stocks discussed.