Sudarshan Sukhani of S2analytics.com believes that the short term trend for the market is on the downside. So, he expects May series to end lower than it started.
However, he holds a bullish bias for the market today. So, he expects to see some gains in Nifty and individual stocks.
Below is the edited transcript of the interview with CNBC-TV18's Mitali Mukherjee and Sonial Shenoy Also watch the accompanying video.
Q: How do you approach trade after the last weeks rather off colour performance both for the index and for stocks?
A: There are now two under currents in the market. The intermediate term trend is down. So, I assume that May series will end lower than where we started. For the short term, for today, I am taking a mildly bullish bias. I am looking forward to some gains in the Nifty and in individual stocks.
Q: The biggest out performer last week was TCS with 9-10% move; would you continue to add on to that?
A: Yes, because we have to listen to the market. TCS wasn’t a one day wonder. It didn’t go up only for one day and start moving in a trading range and give up its gains. But after a day of rest, it renewed its advance in a market that was listless. So the market is giving significant thumbs up to TCS.
The resistance levels have already been broken after the gap up and it seems that new targets are being set for the stock. So TCS is a buy today with a target at Rs 1,225 for the short-term but it could be higher for the longer.
Q: You would sell Voltas today?
A: Yes, because that entire sector is in dumps. It underperforms when the markets go up and it goes much lower when the markets come down. Voltas is a slightly dicey stock to trade in because sometimes it also gives those mild upswings. But the broad pressure on Voltas is on the downside so Voltas is a short sell. I would expect it to move lower probably crack Rs 100 at some point, that could be a target for the day trader but one should expect Voltas to go below Rs 100 again.
Q: McLeod Russel sees trading activity now and then, is it a buy this morning?
A: McLeod Russel has been a buy consistently. The stock has moved up from Rs 190 onwards. We have seen mild corrections in the stock and then a renewed advance. Nothing is going wrong in tea. In fact the other advantage for McLeod is also that it’s the only liquid stock in that small sub-segment that is tea.
So anyone wanting to have a bullish play on tea needs to come to this stock. But individually the charts are excellent, correcting then again making new highs. McLeod Russell is a buy. Rs 288-290 could be an initial target but I am assuming it will eventually cross Rs 300.
Q: BGR Energy Systems is also a sell for you?
A: The whole infrastructure space is collapsing. It is not going to be so easy for it to go from that collapse to a recovery. We have seen how Lanco Infra has almost given up all its gains, it doubled, tripled and now coming down the same way as GMR.
BGR Energy is a sell because the stock rallied but the rally did not hold on. That was apparently a relief rally in an ongoing bear market. So look for a target of Rs 315 and then eventually again Rs 300 is probably going to be broken here.
Q: Crompton Greaves as well is a sell for you today?
A: Yes it is a sell. We had that big decline in Crompton Greaves in June last year because of news but it recovered, and so I thought maybe that bear market in Crompton was over and the recovery was beginning of a new up move. There was money on the upside and that money was also made. But clearly that was not so. We have these relief rallies which can give the image of a bullish move but they are just that, just corrections in an ongoing bear market. That seems to have happened with Crompton.
Crompton is now a short sell. It’s not the first time and it is becoming a short sell. Look for a target of Rs 123 and I think it is going to break below Rs 100.
Q: GMDC has been range bound for a while, you expect that to break out of its range anytime soon?
A: It is a reversal play, which means it has been range bound and came to the lower end of its range. At the lower end on Friday, it did some nice interesting things and I am ignoring Saturday session. So it’s quite possible that we may see a bounce, if not anything, at least to the higher resistance levels. Or if this is a change of trend then we will know after some days. But in either case, GMDC is offering a low risk buying opportunity. It is standing at support and has just begun a small upmove, which could take it another 15-20 points on the higher side. It is at Rs 192-195, we could take profits and trade this range.
Q: Are you getting a bit worried about the broader market versus the narrow indices. Last week the midcap index was down 3% for a 1% Nifty loss, is there pressure showing up on the broader market?
A: Yes the pressure is visible, what happened was that the CNX Midcap index has already fallen from a significant bearish pattern, I have referred to a lot of distribution going on in midcap stocks, pointing out how they are making descending triangles, head and shoulder patterns and that is reflected clearly in the midcap index itself. So the midcap index has begun a downtrend, with a confirmed reverse chart pattern, which told us that distribution was taking place, that distribution is over and the downtrend has started.
But I won’t say I am worried because the market needs to trend up or down, if it is trending down then we have to take the short side. So for most midcaps the trade is on the short side, which is what my trades are also reflecting and the charts are saying that.
Q: How do you approach trade, in the sense which instrument would you work with given how low the volatility has been on the index now?
A: Even now for the day trades, I would be using a Nifty Futures because low volatility can actually become lower. So we can find that if we buy an Option, we could end up with gains in the Nifty for example a Call Option and the Call not going anywhere. So till there is an explosion Options are best left alone, so Nifty Futures would be the preferred instrument to trade.
But for people who are keeping a position for a month, which is what I am anticipating that positional trade can easily be done with put options on the short side because you are getting them at a very low cost.
Q: On Saturday when we saw trade open for a short while, the fertilizer space was up and away with many of those stocks showing about 9-10% gains. How would you trade something like Rashtriya Chemicals and Fertilisers (RCF) for the morning?
A: I would trade it on the long side. It’s one of the rare cases where I would say that in spite of the big gains we have seen on the previous trading day there is money on the upside and it is possible to go and buy RCF on any intraday consolidation. Usually, I would advise to wait, take a few days off and then enter but in case of RCF, this momentum should continue.
Q: We were talking about the down tick expected in many of these infrastructure names. Interestingly you have a buy in Lanco Infra – is that chart is looking better than the others?
A: It is not looking better. But Lanco has completed its pattern targets and that is a significant event. It fell and turned half; from Rs 24 it has come down to Rs 12. But in the process, it also completed a reversal pattern and had reached its target. So, once a stock completes its downside target, going short in that stock, at the target, is very risky affair because if not anything, it can bounce and give a relief rally.
So, at this point Lanco is an interesting buying opportunity. I would not short it at all and traders can see some intra day strength. If they see some strength, Lanco can be bought because on the upside also it is a high beta stock, it can rally significantly.
Q: Another one from the infra space is HCC, which lost nearly 18% last week, you view on that?
A: HCC has not completed its targets. The targets are between Rs 13.50-14. So the same rule of Lanco doesn’t apply to HCC. I have been downbeat and bearish on HCC for a long time now when it was cracking below Rs 30. It’s not good. Even assuming it reaches Rs 14, it could stay there in that range for months, it is a short sell.
Q: How about something like a Biocon? It moved on news of its results but technically how does that chart look?
A: That movement on news was nothing. Biocon is consistently moving down, then it went in a trading range and we saw a big thrust on Friday - that was just inside the trading range. The thrust was not enough to break out above resistance. So Biocon’s downtrend is intact. In fact the gains we saw give us an opportunity to go and sell in strength that is a sell on rally for a down trending stock. Biocon has a downside target of may be Rs 228-225 or even lower to Rs 215, it is a sell.
Q: What about Maruti? How would you react to that one?
A: I would react very positively. Like TCS, Maruti has been surprising on the upside. Most traders have been found to be pleasantly surprised; it’s going in a consistent uptrend. Maruti is just breaking out of that Rs 1400 level and if it does that there is much more move on the up side. So, for today Maruti should be looked into for buying. If the markets hold on after the first 15-20 minutes Maruti would be a preferred long candidate.
Q: Delta Corp continues to be closer to that 52 week low. Would you sell that stock today?
A: Yes I would, except that short selling anything that’s now come to Rs 58-57 is a difficult issue tactically, because you have to put a stop loss, there can be intraday runs on the stock. So it’s not easy to short it but the trade is on the short side. Although I would recommend that Delta Corp really needs to show some rallies before you can sell in that strength. But if somebody were to look at this stock and say what to do? The suggestion would be go and sell.