Apr 20, 2012, 08.43 AM | Source: CNBC-TV18
Despite the fact that the market is struggling, Sudarshan Sukhani of s2analytics.com believes the short term trend in the market remains upwards.
Sudarshan Sukhani (more)
Technical Analyst, s2analytics.com | Capital Expertise: Equity - Technical
In this scenario, his call is to go long or buy on dips. "I plan to take fresh longs today if market gives an opportunity," he explained.
However, he advises traders to be cautious with their volumes since the market has just come out of a trading range. “If you don’t manage your volumes inside the trading range, then traders are slaughtered,” he said.
He goes on to say profits should be booked before the Nifty hits 5400.
Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
Q: It looked like the market was struggling to get to that 50 day moving average (DMA) target. Is that what is happening technically when you look at the Nifty's charts?
A: It is not just the 50 DMA, the market is struggling to move up. I think broadly we can take that view. It did do some good things day before yesterday, but yesterday the price action was disappointing. We broke out with a gap, but that gap should have been more or less maintained for a strong momentum sign for market and that didn’t happen. The market sometimes can move randomly or move differently.
So the short-term trend, I assume, is still up because the moving average will not act as resistance. Once the market decides to move up, it will go up. What we want to see is whether there are enough participants on the long side.
As of now, the view is that we should remain long or buy on dips. I close my positions almost at the lows yesterday when the market was closing, so I plan to take fresh longs today if market gives an opportunity.
Q: Exide slipped off yesterday. Is the stock headed lower?
A: I think it is headed lower. Exide was one of those stocks which had completed its correction and was now resuming its uptrend. That uptrend, however, faced a lot of resistance at Rs 130-140 levels, so it hasn’t worked out.
Now we are seeing a resumed move on the downside. This downside could be a much bigger down move than we imagine. It has broken down from the support at Rs 135 then Rs 130, so we are looking at lower levels in Exide. It is a reasonable sell at this point of time.
Q: You think IVRCL is also topped off this moment?
A: Yes IVRCL has topped out. It is a riskier call as compared to Exide because Exide has turned over given a lot of distribution signals and then broken down. IVRCL has not yet done that, but the way it rallied and then fell in the last three-four days tells us that at least the intermediate top is in place.
So now it could distribute, it could go in a consolidation, it could spend some time but an intermediate top is in place then it is not going to stop here. The chances are it will go much lower till it finds support, which will come in significantly lower for IVRCL.
Q: We were discussing Idea yesterday and it lost even more ground. You would continue to sell that stock?
A: Yes, with a lot of regret because a lot of these stocks gave signs that they are going up, moving higher and then suddenly they have been facing a lot of headwinds on the price charts. Idea is now a sell, it is not necessarily in a downtrend, but for short-term traders even a deep correction represents a selling opportunity and chance to make money.
Yesterday we saw a very big crack in Idea, after which you want to see some kind of bounce before you go and sell. That bounce should come probably today and that would be a point when short positions should be taken.
Q: Blue-chip from the banking space today, HDFC Bank ?
A: Yes, the new high should be bought. The only problem with HDFC Bank is that it is a relatively low beta play, but in a market that is doing nothing, it is better to have something on our plus side. HDFC Bank’s move yesterday suggested that inch-by-inch it is going to move higher. So I am not sure if this is a pure day trading play.
If you have an opportunity, go long in it. If there is a big move today, take profits otherwise wait patiently and it should reward traders if you are prepared to wait for a few days.
Q: You were telling me about Sun Pharma yesterday. Is it a good looking chart?
A: It is an excellent chart and these new highs have to be bought. The market is saying, I am willing to pay a higher price for this stock and we have to listen to that message.
Sun Pharma made a new high yesterday; it repeatedly makes these new highs after which it sometimes consolidates, but that is okay because it leads to higher price levels. Sun Pharma is looking for at least Rs 650-700 and that is a good 10% from the current levels. We could see follow-through today so traders should be watching it carefully.
Q: Tata Power also on your buy list today?
A: Yes, but it is not in the same grade as HDFC Bank or Sun Pharma, in a sense it is not making new highs. Tata Power came through a very deep correction, so to that extent the trader is buying in anticipation of a sustained upmove. So there is much more headroom here, more percentage gains are possible.
Tata Power has made a bullish head and shoulder and broken out of it on the upside. That is good news because the reversal pattern tells us that a sustained upmove is likely. Now you can have down days, you can have consolidation, but Tata Power is a stock that is going to remain on my long-only list for sometime. Yesterday it broke out, today that breakout can see further gains. Tata Power should be bought into, people should also look at May options for Tata Power on the long side buy calls and take a bullish stance.