Mkt to resume correction, look to book profits: Sukhani

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The market is ripe for some kind of correction or resuming its bear market move, says Sudarshan Sukhani of s2analytics.com. "Long positions from this point onwards are not a good idea," he tells CNBC-TV18.

With the RBI policy tomorrow and expiry on Thursday, Sukhani believes that the market will be on short side for the first half of the week. Therefore, he advices traders who have long positions to book profits and step aside. "I would prefer to take a short position using puts," he added.

He goes on to say that this correction will a deep one, and the market could go to test 4530 levels.

Below is an edited transcript of his interview with Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying videos.

Q: Perched at the 5050 mark on the Nifty, how would you position yourself for trade this morning?

A: I would not take any long trades now. I had suggested taking profits on carry forward long trades on Friday itself, but if people still have it, my suggestion is to take profits and step aside.

The market is now ripe for some kind of a correction or a resumption of the bear move, we will find out which one. So long positions from this point onwards are not a good idea unless there is some kind of consolidation or some kind of correction the long position.

We have big news tomorrow and then F&O expiry, so first three days the direction should be on the short side. If there is an opportunity, then I would prefer to take a short position using puts. So it's not as if there would be no trade, it's that now the bias at least for the next three days is not long.

Q: You are short on United Spirits ?

A: Yes, I am. United Spirits did rally from Rs 450-650 for some unknown reason, but that rally is over. These rallies we have seen in host of midcaps also; 50-60% rallies, 10% a day. All these are not necessarily a bull market rally. They are relief rallies maybe in a bear market.

I am almost certain that the rally in United Spirits was a relief rally after that stupendous decline. For the last two days we are seeing lower highs, we are seeing the prices fall and the bear market in United Spirits is likely to resume. It's almost a given short candidate.

Q: What about something like ACC ? You would sell into that as well this morning?

A: I would because ACC has been an underperformer. While the Nifty was going up, ACC made lower highs. It failed to cross Rs 1,185 which was its previous high, so it's making a flat support and repeatedly falling highs. It's very bearish pattern eventually on the intermediate term.

So the uptrend in ACC is over and traders should look to go short. The first targets should be Rs 1,100. If that cracks, which it could, then the entire cement pack is on the reverse side.

Q: Let's talk about a couple of buys. You have picked DCB from the banking lot.

A: There are two reasons. First the banks themselves are outperforming. The Bank Nifty is doing wonderful things. It opens in the morning and closes 200 points higher in the afternoon. It's a trade that you can do with closed eyes.

I don't know about today, but everyday in the morning we buy Bank Nifty and we get out in the afternoon with Rs 200 points. DCB is one of the better stocks in terms of charts. It went up and it declined which took the shape of a flag. A flag is normally made midpoint in an uptrend. Whether it's midpoint or not, we are certainly looking at something like Rs 47 or even Rs 50 for the stock. There is lot of upside and positive momentum in it. So for today it's a buying opportunity, because if anything moves it will be the banks.

Q: BHEL reports its earnings on Friday, but for the day how would you trade that stock?

A: I would buy it because this has been in a consistent uptrend. We did see a three day correction, but that ended on Friday. Good stocks primarily correct for two or three days and this one did it for three days. After that, we have to assume that the uptrend is going to resume again; there is that usual caveat.

If the Nifty chops around, then BHEL should be one of the outperformers. But if the Nifty suddenly decides to fall, then quite apparently all Nifty heavyweights will participate in that decline. But if there is a choppy market, if there is a trading range, then stocks like BHEL should do pretty well today.

Q: You are selling McLeod Russel from the midcap space?

A: That keeps on coming in my sell list. It keeps on making new lows and again it's at a new low. The chances are that it's beginning a bear market and then I will have to see what is going on in the tea business as such.

But for McLeod Russel, the signs are very ominous. Difficult to say what's going on, but it's going to go lower than Rs 150-140 and probably much lower. It's a short-sell every opportunity.

Q: Finally the big mover of late ONGC . You would continue to buy that one?

A: I would because the original targets were Rs 280. It's already at Rs 277 which is at Rs 280 broadly. Again in a choppy market some stocks go up. ONGC now gives the impression that it's willing to cross Rs 280 and take a trip towards maybe even Rs 300. So it's a relatively low-beta stock. There is an element of riskless trade here. So ONGC is a buying opportunity for today and maybe people will switch from Reliance to ONGC, it's quite possible.

Read on for more stock specific trading calls..

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