Don't trade in Nifty, wait for a bounce back: Violet Arch

Mithil Pradhan of Violet Arch Capital told CNBC-TV18 that the short-term trend for the markets is down. He suggests that one should not trade Nifty now and wait for a bounce back to 5,260-5,270 levels.

Meanwhile, metal the index is facing good amount of support at 9,100-9,200 levels, so he doesn’t suggest short metal stocks right now.

Below is the edited transcript of Pradhan’s interview with CNBC-TV18.

Q: What is your technical call on the Nifty now?

A: I am looking at a couple of things. Looking at Nifty only right now is pretty confusing for a standalone Nifty trader. If you draw a trendline from the June lows and connect it with the July low of 5,032, we get a trendline support falling around 5,200 levels. There is also a cluster of retracements coming around 5,190-5,191. I think that 5,200 can offer some kind of support.

The short-term trend definitely is down, but then the most important level that I would be looking at is around 5,109 and 5,133 because it consists of a 50% retracement and symmetry as well.

We are not doing long. Even if you look at bank Nifty yesterday, it broke below 9,900 kind of support. If Bank Nifty fails to offer any kind of rally from here then we are looking at levels like 9,000 in the immediate short-term. We are looking at shorting opportunities, but we are looking at rallies which can be used for shorting opportunities.

Q: In your search for shorting opportunities, where do you find richer pickings, in the beaten down metal space or some of the infrastructure stocks like BHEL, JP etc which have started cracking?

A: We have been short on JP right at the top to be very honest. We have been short on metals index at around 10,500 levels. While, I still remain hopeful for further decline towards 5,100 or 5,130 levels, the risk reward at this point of time either in metals or capital goods or infrastructure names is not that favourable at this point of time.

Metals index faces a good amount of support around 9,100-9,200 levels, which is very near to the December lows as well. I would not advice anybody to go short in metal stocks right now.

As far as BHEL is concerned, when the markets rose during January-February of 2012, BHEL completed a three-way pattern. This is one stock which I would love to sell on rallies. I am basically looking at something like Rs 222-223 sort of level. If ECB comes out with something positive today and we get a rally then I would love to short BHEL.

Q: Give us a quick word on NTPC on which you have a bearish trading call?

A: The chart of NTPC is very interesting because from the last one to one and a half years, it has been making rallies of about 27-28 points , which go to about 32-34 odd points. If you look at the current rally which has started from about Rs 140 levels, it has gone up about 30-34 points. At Rs 173 to Rs 175, there is a cluster of major resistance levels.

Q: If you had to take a trade right now, is it a no-trade zone in this 100 point range or can you take a long or short call on either the Nifty or the bank Nifty?

A: For me, it is a no-trade zone because I am not a momentum based trader. I would rather look at Bank Nifty. If it does not come above 9,900 levels today or tomorrow, I will open a short for a target of almost about 9,000 levels.

This is because the weakest chart as of now is in the interest rate sensitive sectors like banking, auto and realty for that matter. Nifty, I will wait for some kind bounce back towards atleast about 5,260-5,270 kind of levels.