Nifty unlikely to hold 5400 level: Jai Bala

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Nifty unlikely to hold 5400 level: Jai Bala

Jai Bala, Chief Market Technician, Cashthechaos.com in an interview with CNBC-TV18 said," It is very likely for Nifty to burst through 5,400 level and probably challenge the January lows at 5,177."

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Jai Bala 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 Oil and Natural Gas Corporation | Infrastructure Development Finance Company | IRB Infrastructure Developers | Punj Lloyd | State Bank of India | Gillette India |

Jai Bala, Chief Market Technician, Cashthechaos.com in an interview with CNBC-TV18  said, "Nifty recently dropped to 5,450 and it did not even cross 5,550. This looked like a failed move as a result Nifty is going to give in to the support, the support is not going to hold. It is very likely to burst through 5,400 level and probably challenge the January lows at 5,177."

He also citied techinal readings and outlook stocks across various sectors like Reliance , ONGC   IDFC   IRB , Punj Lloyd  and SBI .

Below is the verbatim transcript of his interview with Mitali Mukherjee and Udayan Mukherjee of CNBC-TV18. Also watch the accompanying video.

Q: Looks like a rough start at 5,400 that is coming up but do you think those support levels will hold out in this move?

A: It looks like it is not going to hold. I had warned a couple of weeks ago that dollar index is starting a very powerful leg of its upward journey. You saw the move actually got confirmed yesterday. Now you can see the dollar index heading turbot 79 in the short to medium term.

Once that happens all the risk assets across the globe are going to get smashed. What you saw yesterday was just the beginning of this powerful move. Risk assets are going to get smashed across the globe irrespective of which asset class they hold out to.

I also pointed out that there is a possibility that Nifty might bounce to, drop down to 5,450 and then head slightly over 5,600. But, what has happened recently is it dropped to 5,450 and it did not even cross 5,550.

This looked like a failed move as a result Nifty is going to give in to the support, the support is not going to hold. It is very likely to burst through the 5,400 level and probably challenge the January lows at 5,177.

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Q: So if we get a gap down this morning and we get to that 5,400 kind of level as a Nifty trader and as an intraday position what do you do - do you open up a short at that level or then you wait for the market to give you a pullback?

A: The Monday's low of 5,440 was quite important. It took it out on an intraday basis very close in yesterday's session. So, if it gaps down it may not be sensible to sell it.

But, an intraday rise is bound to happen once the market gaps down that rise can be sold into. You can see market trying to bounce back to that 5,440, closer to that 5,440 level. One can attempt a short trade on intraday basis or a one to two day time frame around that level.

Q: If you were running long Nifty positions through options or futures would you wind them up immediately or do you think you should hold on with a sub 5400 kind of a stop loss and see whether the market is bouncing back?

A: The 5,400 level is going to give in but probably if 5,400 is your stop, if it gives on a closing basis in that case you have to wind up the option. Otherwise, you can give it a little bit of rope for the market to be on the long side. But, it is going to give in. It is a matter of fact it is not looking pretty at all.

Q: What kind of correlation do you see between the Nifty and the bank Nifty now - do you see a lot of downside risk for the bank Nifty and by extension our index?

A: The banking pockets has always been the leader on the upside and the downside. We saw it leading down on the way from January to March. Right now the selling pressure is abated little bit in the banking space.

That has been taken over by the upstream space in the oil and gas sector. There is tremendous amount of weakness that is bound to happen in Reliance and ONGC .

Having that in mind, your target for selling the market need not be the banking space. Although there are pockets of weakness still bound to happen in the banking space. But, the pressure is going to move from the banking space to the upstream oil and gas space.

Q: A word on IDFC , that stock is down 8% this week from a trading perspective is there more downside?

A: The structure of stock is looking like it has got much more downsides to come. If you put it in a technical way this is a start of either a powerful C leg or a powerful third wave.

This stock is going to break the January lows and head to double digits and you are probably looking at in the region of sub 100 levels over the short-term. The stock is really weak and if you place of stop of about Rs 137-140, you can trade the stock over the short-term tied it down to this level.