Expect market to rebound post selloff, says Sukhani

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After the big selloff we have seen the past few days, Sudarshan Sukhani of s2analytics.com believes that the market is not ripe for a rebound. "I expect the market to remain cheerful or at least move towards the upside," he said in an exclusive interview.

Therefore, Sukhani advices taking long positions during the day. ": I would be a buyer in the Nifty and that is starting in the morning itself," he said.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: After three days of the market losing ground, what kind of approach would you take on the Nifty as an intraday call today?

A: I would be a buyer in the Nifty and that is starting in the morning itself. I expect the market to remain cheerful or at least move towards the upside. In fact, just before closing yesterday I had explained that I have taken some long positions and the idea was that they would be closed if the market opens lower.

I don't think the market is likely to open lower and the view is that after this big selloff markets will see a rebound. The extent is not known, but the trade is on the long side.

Q: You have got some sells in your list today. Let's start with VIP .

A: VIP has been a distinct underperformer. The rally was very low paced as compared to the other midcaps and then it has turned around, distributed itself prices at the top and broken down from support levels.

So even if the market is mildly bullish, which is what I expect, there will be stocks that actually go down and I think VIP has not come out of its bear market. So here is a stock that you want to sell on any correction in the Nifty. We are in a correction, so it's a good stock to sell into.

Q: Dhanlaxmi Bank has been doing well even in a weak market for the last couple of days. Is there more upside you see there?

A: There is more upside. Dhanlaxmi Bank was in a major bear market of its own, so it did not participate when the broad rally started; it's much lower than where it was two years ago. Now it has made a bullish head and shoulder pattern and broken out of it.

So in spite of the fact that it's done very well the pattern has just been confirmed, I expect a lot more upside here. Good stocks can keep on rallying; there is no limit to the number of days they can rally. Dhanlaxmi is now coming in that area. It is now supported as I explained by a fairly bullish pattern, so eventually we should see even Rs 95 or Rs 100. That's not an intraday target, but it's a position trade as well as an intraday trade on the long side.

Q: There has been some strength in the defensive ITC which is up about 4% in the last three days. Do you think this one looks good for more?

A: Yes, because it's just broken out of the Rs 208-209 trading area where it was finding repeated resistance. In fact, four or five occasions that acted as resistance and ITC did not participate in this entire rally. When the Nifty went up 1,000 points, ITC was completely sideways locked in a 20 point range.

But the context is also different. In a sideways market, defensives can do well. But apart from that, on the charts itself ITC's participation in the rally is probably now coming into force. So here is a stock that broke out yesterday from a long resistance zone, it's a blue chip in its own right and the market is probably conducive today. So ITC is probably a position trade as well as a day trade.

Q: You are cautious on some of those quasi real estate stories though like Century Textiles ?

A: Yes. I am cautious on that because the rally was very steep, not because Century itself is in a bear market, that's not the case. Unlike VIP, Century is okay, but these steep rallies have to get corrected.

Century's correction is probably not over. That's going to happen to a lot more of these midcap stocks which have jumped a 100%, so Century has more downside. We are trading a correction here, we are not trading a downtrend and that the viewers must understand.

But for a short-term trader it makes no difference in the sense that I expect it to come down further. For Century, if the intraday strength suddenly emerges, it's wise to avoid it, otherwise there is a short trade here.

Q: You are selling Aurobindo Pharma as well today?

A: Yes, it's a horrible chart. It made a double top and it's broken down from that double top. So it seems that the rally we saw in Auro Pharma was just a bear market rally. It does tell us that all the midcaps are not out of the woods. A lot of them are still in trouble and may see lower levels.

It's quite possible that Auro Pharma may eventually go back to Rs 70-72, the lows from where it started its uptrend recently. The charts are absolutely horrible. Yesterday it broke out from support, a lot of stocks did that, but I suspect that's going to continue on the downside.

Q: Finally from the midcaps you have got a buy on GMDC .

A: GMDC again has made that bullish head and shoulder pattern and come out of it, something very similar to Dhanlaxmi although it's a very different sector. It took almost two and half months to develop that pattern, so this is not going back in a hurry. We are going to see significant gains in GMDC.

Yesterday the first signs of a breakout have come. It hasn't broken out yet, so that means we can actually go and buy it today before what I hope would be a breakout. For position traders, you take a position and hang onto it because there is much more upside here. The chart patterns are just beginning to turn bullish.