Hold onto positions and trade with caution, warns Sukhani

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Due to negative global cues coming in, Sudarshan Sukhani of s2analytics.com tells CNBC-TV18 that traders should remain cautious today. "The procedure today is to hold onto what positions we already have and wait patiently for the first two or three hours for the market to decide exactly where it wants to go," he explained.

However, if the Nifty slips below 4800, Sukhani advices traders to cut off long positions.

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

Q: We are expecting to see some weakness at the start of trade. How would you approach it as a Nifty trader? Is it an opportunity to buy or would you trade with caution around these levels?

A: There is some caution here, but the short-term positions that were on the long side continues to be carried. So the procedure is to hold onto what positions we already have and wait patiently for the first two or three hours for the market to decide exactly where it wants to go. That would be the approach.

Q: Below what point on the Nifty would you cut off those long positions?

A: Below 4,800 or the range between 4,800 and 4,830. Depending on where the market opens, I will give it a 30-40 point leeway on the downside, and then 4,800 is where we will start thinking that this is not working out.

Q: Let's start with some of the midcap stocks on which you have got a buy out this morning. LIC Housing Finance first?

A: Yes, this is the contradiction. A lot of these stocks are exhibiting strong bullish patterns; even the Nifty did that. The Nifty has retreated mainly because of international cues and Infy, but LIC Housing is on the verge of a significant breakout on the upside. It's something called a bullish ascending triangle that horizontal resistance is somewhere around Rs 240 and it breaks out and goes onto new highs.

Now I don't know if this is going to work out or not, but this is a trade that we need to take. Luckily today will be a soft day, so rather than rush into it, at some point during the day we should be able to get it lower also. But the pattern suggests significant upside there is just beginning.

Q: What about something like ITC because FMCG was a bit soft last week?

A: It was, but ITC has now done the same thing that the Nifty was doing so far, which is trading in a range. But the pattern inside the trading range suggests an eminent upside breakout.

If ITC is moving up, it's not going to do this alone. I am assuming it will be part of some kind of a Nifty rally. But it's wise to watch ITC and it's quite possible that ITC may give us the first signals whether it's willing to go up. So ITC is again ready to breakout and that would be remarkable. It would then move into new highs. ITC's ascending triangle pattern is a buy. Again the day is going to start soft, no rush. Wait for the market to consolidate. Focus on ITC, LIC Housing as I have just explained.

Q: There was quite a bit of buying on power last week. Can you think something like Areva T&D is good for more?

A: It's good for more. It rallied from Rs 130 and it reached Rs 170. That was a very decent rally from the lows. Now at Rs 170 in all fairness the stock has started consolidating; it's been consolidating for three weeks now. The consolidation has come on the back of a rally. It's reasonable to expect that the breakout will be in the same direction that is up and if it breaks out we have a target of Rs 200 plus for it eventually.

So Areva seems to be ready for a breakout. It did very well on Friday, it moved up and I think it's just inched above resistance. Perhaps it will follow through even without the market supporting it. That's something we need to watch from the morning itself.

Q: You have a bullish trading call on Bharti ?

A: Yes, after a long time. Let me explain that the quality is not as good as that for ITC or LIC Housing, but Bharti is Bharti. It seems at Rs 318-320, some kind of a double bottom is being made. If that is so, then we will see a rally to the neck of that double bottom and then maybe higher.

We have already seen some upside movement on Friday and perhaps that will sustain today. In any case, it's a large cap stock. We already have the stop losses and if it goes below its double bottom, we close the trade, we did not do that. So Bharti is now a short-term trade.

Q: Lupin is a sell today?

A: Lupin is a sell; it's been a disappointment. Lupin's equivalent value was Rs 450 when the Nifty was 4,800. Now Nifty crossed 4,800 but Lupin did not. It's actually retreating day by day. It's fallen again on Friday. Lupin for some reasons, I don't understand the fundamentals, but the charts are telling me that this is in a bear market and going to do much worse. So Lupin is a short sell today and even if the market rallies.

Q: You have got a sell out on United Phosphorous as well?

A: United Phosphorous rallied from Rs 123 to Rs 145 and now it's retreating. The key here is that on Tuesday all stocks rallied with the Nifty. The Nifty's level was 4,760 and it has held onto that level. But after rallying, United Phosphorous has broken its last Tuesday's lows, which means that it's now distinctly weaker than the broad market and the main index.

Again the trade is there to sell it because we don't have to find out why. Just go and sell, put a stop loss, probably it's going towards Rs 133 again.

Q: A big star from last week, Tata Steel .

A: Tata Steel remains a buy and that's because I have this bias on the bullish side for steel. The Nifty itself is in a buy zone, so most of the heavyweights are there for buying and Tata Steel is a buy. Look for a target which is modest on the upside but try to be long with it.

Q: What did you make of the reaction in Petronet LNG on Friday?

A: It shouldn't have happened because if a stock is in an uptrend, news shouldn't cause it to tumble. So that tumbling of Petronet tells us that perhaps this uptrend, at least for the short-term, is getting away and the trade is now to go short in it. I will have to assume that this downside movement will continue.

Q: Is there more upside for Dish TV in the near-term?

A: There is. As I have already explained, a lot of these stocks are building small basing patterns and are either willing to go up or already moving up. Dish TV is a stock that has already broken from a small trading range, so try to look to buy it.

Q: How about Suzlon ? It was up more than 20% last week?

A: Theoretically on charts it's a buy. But as you said, it's up 20% and it's very close to its resistance of Rs 24. So it's far wiser to wait either for a consolidation or for an actual dip on the downside before you enter it on the long side. That's why Suzlon is a trade which is best left alone for a few days.

Q: Quick word on NHPC ?

A: It's a buy. NHPC has gone through a bear market bottom. It's not probably going to rally inch by inch or let's say rupee by rupee.

Disclosure: I have no personal holding in any of the stocks discussed.