Gut feeling is market will breakout above 4800: Sukhani

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Sudarshan Sukhani See what other Experts & Brokerages are saying about Reliance See messages about Reliance Reliance BSE | NSE 29/05/12 Are Mutual Funds betting on Reliance? Other Stocks in this news Housing Development Finance Corporation | Adani Ports and Special Economic Zone | Jindal Steel & Power | Reliance Communications | Bajaj Hindusthan | Balrampur Chini Mills | Shree Renuka Sugars | Bharti Airtel | Oil and Natural Gas Corporation | S Kumars Nationwide | Pantaloon Retail | Shoppers Stop | Bharat Heavy Electricals | Jaiprakash Industries | Larsen and Toubro |

The index, which fell nearly a quarter in 2011, rose 2.7% this week. So a truncated one and a half hour session, but a weekend market session nevertheless.

Yesterday, oil & gas, FMCG and banking shares did well, while capital goods, realty, power and automobile shares were among the laggards.
In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.com sees the market in a trading range still. He says that the simplest trade and the best trades will come when we come out of it.

Below is an edited transcript. Watch the accompanying video for more.

Q: What did you make of yesterdays close for the Nifty? How would you trade it from beyond this point?

A: The Nifty itself remains in a trading range. Yesterday, the index actually moved down and broke the lower level of 4,700, then moved up and almost broke 4,800. So the swings were both ways. To that extent we are in a trading range. The simplest trade and the best trades will come when we come out of it.

Q: For now would you take any kind of trading positions on either extremity of the trading range?

A: No. The trade is to buy both - calls and puts which means that we are positioned to take advantage of whichever side the breakout or breakdown happens. Then get out of the losing leg which means that we don't actually buy it when the Nifty crosses 4,800 because it could open with a gap for all we know or sell it. We position ourselves on both ends by buying the call, buying the put of 4,700 and then wait patiently for a breakout to occur.

Q: What did you make of the pullback in Reliance? Has that changed anything technically for the big stock for you?

A: No it hasn't. In Reliance , the pullback has come accompanied by a bit of drama yesterday. Some gains in the Nifty means nothing. Sometimes a message is slightly different and that is that Reliance has touched the Rs 690 target - that was the first target we had given. We are looking at Rs 600-630 now. So after a target is achieved, it's quite possible to see relief rallies, a sense that maybe the worst is over. All that is possible in Reliance but I don't think the lows have been made yet.

Q: One heavyweight that you are buying is HDFC ?

A: HDFC is a stock that you should always buy whenever the opportunity arises. It's not a stock that you want to go and short sell. It's the easiest index stock to be pulled up because it also comes with a lot of quality. Now what happened was HDFC went through a very sharp rally from Rs 600 to Rs 680, almost 15%. Then it went through a very shallow correction.

That correction seems to be over since it has been gaining for the last two days now. It's on the verge of a breakout again but whether the breakout happens or not, the stock is a buy. You have a large rally and a shallow correction and it's in all fairness a resumption of the uptrend. So, yesterday's gain should be built upon.

Q: What about something like Mundra Port ?

A: That's a falling knife straight, which means that we are trying to catch the lows. Mundra Port hasn't confirmed it yet, but it has made some kind of a double-bottom at Rs 116. Then it went below that and bounced back. The double-bottom will actually get confirmed if it crosses Rs 134. It hasn't done that, so my trade is in anticipation of an eventual cross on the upside. If it fails, then you have a stop loss. If it crosses Rs 134, it confirms a double-bottom pattern, and then, the trader has entered almost at the lows of the move. So it's worth taking a trade for a very small stock.

Q: The sell on your list today is JSPL ?

A: That's become some kind of a given. JSPL - Jindal Steel and Power, it keeps coming down. The charts have broken down and it tells us that no matter what the Nifty does, this will be a distinct underperformer. It's a short sell. Since the markets themselves are a little choppy, we should have short selling ideas in our list.

Q: We were talking about Reliance. On the ADAG stocks, any follow through you expect or those stocks should go back to being underperformers?

A: They will go back, except for Reliance Communications where I have been fairly upbeat. Reliance Communications is bottoming out in a much longer-term. So while it will remain choppy, the stock is a buy on every dip, every occasion. For the other three, they will go back to where they were. We have always seen that stocks that get blown off in terms of news, rather in terms of rumors will very quickly retreat back. It's just hours of maximum a day.

Q: What's your own gut feeling about which way we will eventually breakout, 4700 or 4800, on the way up or on the way down? If you had to bet, which side would you bet on?

A: If I had to bet, then I would assume that we will breakout above 4800. I am not very good at this. It's far better to be patient and let the markets do it themselves. But because you asked me what my gut feeling is, we have been pushing against 4800, and we are almost on the verge of a breakout. I am not trading on my bets. I am trading on the charts.

Q: What did you make of Bajaj Hindusthan 's chart yesterday?

A: Bajaj Hindusthan has rallied because sugar stocks are bottoming, however, I am not impressed with the rally in Bajaj. The two stocks that I am tracking closely where there are buying opportunities- one is Balrampur , but a much bigger buying opportunity is now coming in Renuka at current prices which closed at Rs 25.70. You put a stop just under Rs 24, close your eyes and buy it. If this works out, you will get multiple gains in this stock. If it doesn't, you have a very minor stop loss.

Q: Quick chart check on Bharti which was under quite a bit of pressure yesterday?

A: It will remain so. I think Bharti has gone through some kind of a significant breakdown. We are looking at Rs 300 as the initial support level and then probably lower.

Q: What's the chart of ONGC telling you now?

A: ONGC is in a trading range. It's almost doing what the Nifty is now doing. ONGC has been doing that for a much larger period. We saw some brief rallies. But I think at some point, ONGC becomes a sell on rallies. It is reaching that point, as will Reliance. Another Rs 30 more in Reliance, it becomes a sell without looking at the price. ONGC is at the same point. Any rally in ONGC should be sold into.

Q: Continued gains on some of those retail/textile candidates like Pantaloon . Faces like S Kumars were also pretty active and Shoppers Stop as well. Have you had a look at any of these charts?

A: Except for Shoppers Stop, none of them justify even a look including Pantaloon which needs to either begin a consolidation or spend a lot of time in a choppy market. Shoppers Stop is a stock that is worth buying for a long term investor. I think at current prices, it justifies no matter what the valuation, it justifies an investment buying, but there is no trade here also.

Q: What do you see on some of these capital goods charts, not just JP Associates but something like BHEL as well that was under pressure yesterday?

A: I think they are going to move with the Nifty. If the Nifty actually does decide to stage a larger rally, L&T and BHEL - these two names only, not JP Associates, are likely to perform with the market. If the Nifty decides to retreat, they will begin their own bear market once again. My point is that BHEL and L&T have not made their final lows. Before making those lows, it is possible that they may see rallies. That would depend on how the broad market does. That is something else. This is about the public sector stocks that Udayan was talking about. We have been told repeatedly by Tulsian how exactly these stocks are owned by the public, nothing. This is absolutely and pure manipulation. Who gets caught? The retail investor gets caught in this. So there is no reason for retail investors to go and buy them. Listen to the wise people on this channel. I am listening to Tulsian. I hope you also do that.