Bearish grind to set in; TCS may fall to Rs 1350: Jai Bala

Jai Bala of cashthechaos.com has a slightly negative position on the market. Although, the momentum for a very bearish setup hasn't picked up yet, he believes it might accelerate in the next few sessions.

Talking on stocks, Bala advised to go short on TCS and expects a decline to about Rs 1350 in it. He also suggested going long on Chambal Fertilizer. "Go long for a target of Rs 56 and place the stop loss below Rs 40," he added. Also read: Nifty in for 5700; look for buying opportunities: Sukhani Below is the verbatim transcript of his interview to CNBC-TV18 Q: There has been a 3 percent slide in the last two trading sessions, how would you approach today? A: Last time I had mentioned that the market must cross a particular level to experience a buying exhaustion. I think that has actually happened. In the long-term charts of Nifty there is a visible buying exhaustion, particularly on the monthly charts. There is a spike high for the month of May and it is close to the lower end of the range. If you look at the momentum it has been strongly disagreeing with the rise for quite sometime. So, this is telling us that the market is fatigued at this point from a very long-term perspective. If you look at the shorter term charts there is a lower top and lower bottom on the daily time frame. So, that is also a negative configuration. In the weekly charts, markets made a fresh 52 week high at 6229. However, on the same week it closed at the lower end of the range. The configuration of the weekly, monthly and daily time frame is actually negative. I must emphasis that at this point the momentum that needs to be seen for a very bearish setup hasn’t picked up yet, but it might pickup in the next few sessions. We are very closely watching and we are slightly negatively positioned for this market. Q: What would confirm for the Nifty to break a particular level or to see this kind of downward momentum, high volatility over the next couple of trading sessions? A: The market take out significant support at a very fast pace. From this point onwards it is not the levels that matter, the speed of the move that matters. If the markets were to take out 5765 in the next one-two sessions, it will confirm it is a big reversal on the longer term time frame. That is what we are going to be watching the whole of this week. Q: How are you mapping the Bank Nifty now and what would be the crucial support level a breach below which could indicate much more downside on the Bank Nifty itself? A: Around12100 on the Bank Nifty is a very important level for me. So, if the markets manage to take out that level in the next few sessions I think the selling could aggravate more than what you have seen in the last few sessions. Important charts like HDFC Bank, ICICI Bank have completed five way from June 2012 lows. They have hit the highs on the weekly timeframe on a falling momentum. So, that is telling us at least there is a significant correction to the April to May move. If 12100 goes, it might even go all the way to the full retrenchment of the April-May leg of the rally. So, these are the important levels for the Bank Nifty at this point. Q: Relative strength has been found in technology but this morning you are caution on a face like Tata Consultancy Services (TCS)? A: March to May decline of TCS looks like a directional move. From that point onwards TCS has come up to a resistance of Rs 1235 in a three step fashion. Yesterday it got very strongly rejected from that resistance. So this is probably hinting at a possibility of further decline below May lows. I am trying to go short on TCS and expecting it to decline to about Rs 1350. Q: What is your call on Chambal Fertilizer? A: If you look at Chambal from a long-term perspective it has been one way from the 2011 highs. However, the last leg has been on falling momentum. There is an indication that it is going to see a reflex rally from the recent lows. So, you might be careful here that the larger trend is down here, but we are trying to play it for corrective up rise. There is a sizeable rally here so we place a stop loss below Rs 40 and try to go long for a target of Rs 56.