See Nifty at 2500 if 2810 breaks: E Mathew

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E Mathew, Director, Mathew Easow, said the market is currently in a short-term uptrend. "If the market is able to cross the tough resistance zone of about 3,050-3,150, then this rally could have more steam."

 

He feels there has been a huge destruction in charts in 2008. "But if there will be a corrective rally in 2009, after the choppy session in January, February, and March. We could see the market bottoming out, at least for time being. Thus, short-term traders should look at 2, 810 as a fulcrum point, but if this point is broken the market would slide to 2,500 zone."

 

Here is a verbatim transcript of the exclusive interview with E Mathew on CNBC-TV18. Also watch the accompanying video.

Q: We are once again pulling back to that level of 3,000-3,100 where we ran into resistance last time. How hopeful or optimistic would you be going into January that this time we maybe able to clear it?

 

A: In the immediate term we are still in a short-term uptrend. The breakout actually took place above 2,810; but we turned up smartly from there. We are still in a short-term uptrend and if we are able to cross that tough resistance zone above 3,050-3,150, then this rally could have more steam.

 

In 2008 we saw the huge destruction in all the charts; the charts have been virtually destroyed and if you see some sort of countertrend, a corrective rally may ensue in 2009.

 

If one goes by the Elliott Wave Theory, then 2009; after a choppy session in January-February-March, should see the final bottoming out of the market at least for the time being. Therefore to conclude I would like to say that for the time being for very short-term traders we should look at 2,810 as the fulcrum point. But if 2,810 is broken there is a possibility of the market once again sliding to the 2,500 zone.  

 

Q: One sector which saw a bit of buying last couple of days is sugar again. Shree Renuka Sugars and Balrampur Chini have seen some upmove. Any sense you are getting there?

 

A: If you look at all the sugar stocks there is a distinctive pattern emerging and certainly you are seeing a temporary bottom, if not a permanent one. Balrampur Chini is looking interesting; the stock is forming good rounding bottom, in fact it has already formed a rounding bottom pattern. I would put my bets on Balrampur. I see an upside from here, a move to at least above Rs 60-65 in the medium-term.

 

Another stock which is looking interesting is Bajaj Hindusthan. Good base formation between the Rs 55-61 zone. I see this move initially take you to Rs 71-72 and beyond that you could even see a blow of rise to Rs 80-85. In fact, I would go one step ahead and say that 2009 possibly one of the brightest sectors certainly could be sugar. 

 

Q: Can you initiate a trade at just below 3,000 or there is not much purchase here?

 

A: It's a tough call. As I said we may see a countertrend to what we have seen in 2008; a corrective upmove in the entire 2009. But I for one feel that the bottoming out process may take a little more time. We are heading into resistance zone 3,050-3,150. I do feel that it would be a levelled upmove possibly to 3,150 and if we are able to breakout pass 3,150 we could get to very optimistic; this is an optimistic target at around 3,400.

 

So at this point initiating a long trade on the Nifty is little dicey in fact I would like to make my disclosure - an associate company has purchase some out of the money puts.

 

But stock specific ones could be on a long side. Regarding, Reliance Communications; I think there is still a lot of scope in stocks like R-Comm, still scope in the sugar stocks and of course there is a quite a bit of scope in the PSU (Public Sector Undertaking) banks. I would prefer to be stock specific rather than trade the Nifty which is looking more and more difficult to trade.           

 

Q: When you look at the infrastructure charts between a JP or a Punj Lloyd or a Hindustan Construction or a Lanco what looks like a best trading play, if you had to pick one?

 

A: I would certainly put my bet on Punj Lloyd it clearly stands out, as the stock to get in. I know that it is not just a cliché that it is a poor man's L&T. But the stock pattern certainly reflects that it would be very difficult for the stock to breakdown below that Rs 125-130 zone and at the current level of Rs 145, your stoploss is so clearly defined. And what is interesting about Punj is, I know it may take a little bit of time to cross that huge overhead supply around Rs 215. But a counter trend rally is something, which I am expecting in 2009. And if there is counter trend rally, which is to develop in Punj Lloyd, it could take you all the way up to Rs 276. So, I think this stock could be a great bet on declines.        

 

Disclosure: It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.