All eyes on next trigger; cautious on Bank Nifty: Kedia

Sushil Kedia, president, ATMA, says that it is better to be cautious on the Bank Nifty because it has moved up a lot. Across the whole market amongst the large caps, banks continue to move up right now.

Below is the edited transcript of his interview to CNBC-TV18. Q: It has been an extremely range bound series, How does it looks like going into January? Is the market breaking out and in which direction do you think?
A: Unless the market breaks out on either side in 140-150 point range for this whole month, till then it is not a great idea to make a major bet.
But if I have to guess, which way it will breakout, I can't rule out a breakout on the upward side but I would still believe to look at many other things that a pullback to about 5620, and if it holds and we find signs of reversal then it would be an ideal trade.
At around 65 percent bias for a drift lower I would like to pick longs for playing one last rebound before we see a significant correction. If it breaks out upwards, I will give it a pass because there are too many overhead resistances and other factors that do not offer a very clean opportunity as of now for playing the upside breakout, should it come. Q: As a positional trader what do you do for the January series?
A: The calendar will keep changing but until the market offers a trigger, I do not wish to get worried. I will play as the trigger comes. If a pullback comes and it holds higher than 5620 with reversal signs, I will still look for longs to see a final play of the last leg of this rally in to the second or third week of January, if it does not and if it breaks upwards. I will sit on the sidelines. Q: What are you seeing on the charts of the Dow and the S&P, there is no break down yet but the last three days they have been moving lower?
A: Different markets are doing different things in different time frames. The S&P 500 chart for the next 3-4 days indicates that it will go back and test at least large intraday low down. Maybe it can slide lower even to 1340, it would not be correct to predict anything right way. A break down or a massive reversal has not happened because my mind is pecked very heavily in deciphering almost all key charts in the whole world.
On the euro JPY, and within the euro JPY, especially on JPY, around 94-95 area a long-term four-year bullish cycle on this pair is coming and the era of massive risk taking is coming. That call has panned out right. We have broken out of a very long-term triangle upwards. I am sure of a massive bull market to have begun.
Having said that, a 20 percent run in such a quick time shows that it is time for a pullback to come down to 400-500 area and in the very short run.
The immediate signs of reversal are not in place, it may take another two-three days and when I am looking at the USD-GPY which acts very strangely amongst all currencies while the US dollars strengthens against other currencies, the JPY strengthens even more than the dollar and vis-a-versa.
While this is spiking up and getting extremely overbought the risk is very high, the sign of a reversal is not yet in place. It may come in the next 2-3 days. So the western markets may still be dippy over the next 2-3 days and there may be some local news that Nifty may be oscillating upwards for the next few days. In that sense, I will not make a one on one correlation between S&P and India for now and it is not yet fully reversed so to say even on the medium-term. One will have to wait for thumping the table and saying it is all over. Q: Any signs of topping out that you see on the Bank Nifty, a lot of technical traders seem to be turning cautious on that.
A: It is better to be cautious because it has moved up a lot but in terms of sign of reversal, that is pocket of strength on the Nifty right now. Across the whole market amongst the large caps, banks continue to move up right now. I will not rush and try to be adventurous until I find a firm sign of reversal.
An ITC and Lever has tapered off and they are seeing a downtrend which has begun. Infosys has been tracking lower and Reliance is flipping around. The pocket of strength that is keeping Nifty in this sideways band is the Bank Nifty. I am not going to rush into proclaim that a top has been seen or a reversal has come in. It can come in, we don't know if another 2-3-4 percent is still left.