See mkt consolidate in preparation for next upmove: Sukhani

“So far I have got nothing on my charts to say the rally is over or the uptrend has got exhausted. This consolidation is simply preparation of another upmove,” he said in an interview to CNBC-TV18.

He further adds that the Nifty is poised to breakout above 5,400 in the next couple of days. “Therefore, I am positioned on the long side,” he said.

Below is an edited transcript of his interview with Udayan Mukherjee.

Q: Are there any technical expectations that the next couple of days might be better or worse than the last week?

A: The expectation is that we are having some kind of a consolidation. This is the nature of the Nifty - it rallies and then consolidates.

So far I have got nothing on my charts to say the rally is over or the uptrend has got exhausted. This consolidation is simply preparation of another upmove, that is my assumption. 

So I am positioned on the long side and I am assuming that for the next few days that breakout above 5400 should come.

Q: What kind of target do you see Nifty moving to? What kind of gains should the positional trader be playing for?

A: I expect Nifty to eventually reach its earlier high of 5600. For positional trader the stops are fairly reasonable and tight. If Nifty closes below 5300, then we know something has gone wrong because the consolidation has broken on the downside.

So, for very small risks, the rewards are decent and even more so if the trader is using options to trade. So, there is a trade on the long side with a clear understanding that it can go wrong.

Q: You have a buy on Infosys this morning?

A: Infosys is now filling the gap that it had opened up when it fell after the results. That gap started at Rs 2,400 and inch by inch it’s moving up. My own sense is that CNX IT is outperforming and Infosys is an outperformer in that group.

Today it should build on the gains we saw on Friday and eventually it should reach Rs 2,400 and fill up the gap completely.

Once a gap is filled, it has even more bullish implications but that is at a later stage. So, Infosys is a buy. Intraday traders must look at it and every dip is a buying opportunity.

Q: What about Bajaj Auto ?

A: The stocks that are doing well are likely to do well. This is a market that is rewarding relative strength. We have seen how infrastructure stocks have collapsed. After declines they didn’t go up, they went on going down.

Similarly, the best stocks are going up. Bajaj Auto, like the Nifty, is in a trading range. I assume that Bajaj Auto is likely to breakout prior to Nifty.

So, we are buying almost before new upmove comes. As usual all trades can go wrong which is why stop losses are used.

Q: Dr Reddy’s from the pharma space is also a buy?

A: It is also a buy. Dr Reddy’s and most of the pharma stocks are probably overvalued and that may well be. But sometimes momentum doesn’t care about value. It has its own dynamics.

Dr Reddy’s is now ready to breakout of a multi month trading range. If it breaks out, that will lead it to new highs. This is a stock for a position trade.

For a day trade, you must catch it because you don’t know when those big moves will come. So, Dr Reddy’s stock should be bought on almost every dip.

Q: You have a sell on Steel Authority of India (SAIL)?

A: SAIL is a disappointment. It has done nothing and it is falling. It made new lows on Friday. For a market that is stable, that is hovering around 5350-5360, for SAIL, there was no need to make new lows.

So, SAIL is likely to remain and underperformer in a choppy market. Assuming we don’t do anything today, we will have selling ideas. There will be stocks that go down and SAIL looks like one of the leaders of that decline.