See correction coming in; Nifty to slip to 5000: Sukhani

In such a scenario, his advise to investors to step aside because corrections are difficult to trade. On the other hand, he advices traders to take up short positions. “A reasonable assumption is that one would see the Nifty drift down to a zone of 4,950 to 5,000,” he said.

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

Q: It was an extremely volatile session yesterday. This morning, what kind of tack would you take on the Nifty?

A: My impression is that we have seen one leg of the upmove and now the chances are that we are going to see some kind of a correction coming in. If that is so, the approach should be to step aside because corrections are difficult to trade. For short-term traders like us, we want to take downsides and see where it goes.

A reasonable assumption is that one would see the Nifty drift down to 5,000; a zone of 4,950 to 5,000. So as of now, I would prefer to take short position if market allows me to do so today.

Q: Indian Overseas Bank (IOB) is in your sell list today?

A: Indian Overseas Bank’s rally was similar to most of the other public sector banks (PSU) but then it cracked and for the last three days it has been an underperformer. As banks come under pressure in four-five days in anticipation of what I think is a correction, IOB will under perform and continue to slide down. This is only a short-term trade because on an intermediate term, PSU banks are excellent buying opportunities. But this is a trade on the downside and it should work out if one is having three-four day time horizon.

Q: You also have sell on Tata Steel from commodity space?

A: It’s a bearish chart. The rally in Tata Steel was similar to once in Hindalco, Sesa Goa and SAIL. The rallies were relief rallies in what is an ongoing downtrend or bear market. That rally has come to an end. Yesterday it broke short-term trend line and broke below that and that indicates that the rally is over. Whether it goes to its earlier lows, tests them and goes further down or not that is for the market to decide but it’s a short selling idea. So in a choppy market one get candidates for selling and this seems to be suitable. Metals are anyway underperforming.

Q: Bombay Dyeing is a buy today?

A: Bombay Dyeing was a favourite but it fell dramatically. It is coming in my buy list often and that’s not unusual because when stocks are in uptrend then they will on and off come in the buy list. Bombay Dyeing rallied from its lows of Rs 380-385 and now it’s on a way to touch the earlier highs of this up move, which was around Rs 600. It broke out of a trading range yesterday and today, one should see a significant up move in it.

Q: You are playing long on Jain Irrigation today?

A: After a long time Jain Irrigation has given the right signals for buyers to step in. It made a small base and that base took the form of a double bottom. It is broken out of that double bottom and chances are that not only will it meet its double bottom targets but I suspect that it will go higher. So initial target is Rs 80 but my sense is that once momentum starts on the upside it’s a high beta stock and Rs 80 may not be the ultimate objective. It could go to Rs 90-95. So it’s now a buy on dips stock.

Q: Bharat Forge is a sell?

A: Last week as well Bharat Forge was in the sell list. The stock has made a visible distribution pattern. It cracked and now it’s continuing its downward swing. It’s little unusual for a blue chip like Bharat Forge to do that in an up-trending market. But the fact that it has become a relative underperformer is a big warning, so do not buy it. I would assume for short sellers it’s a relatively low risk short sell.

Q: Godrej Industries is also a sell?

A: A lot of the fast moving consumer goods (FMCG) and pharmaceutical stocks are suggesting that they are entering into deep corrections. They are not bear markets but these corrections can come way down. Godrej has been a short sell earlier and it has cracked and the chances are that the crack will continue. We are looking at a target of Rs 220 but that may not be the final objective because support for Godrej comes in Rs 200 area. So slowly it could drift all the way down there.