Avoid taking positions in Nifty today: Sukhani

Technical analyst Sudarshan Sukhani of s2analytics.com suggested that one should close short positions and avoid taking positions in the Nifty.

He feels that one should wait for the Nifty cash index to take out 5,150 levels decisively and that could be a buying opportunity. "Till then it’s wise to wait for 100 point band to remain and be choppy," he added. Below is the edited transcript of Sukhani’s interview with CNBC-TV18. Q: How would you approach the Nifty given the global cues that we woken up to? A: It is getting better. It is not going up and it’s not going down and sometimes it does it with violence and if this continues the traders will vanish from this earth. Yesterday’s market evidently justified a short position. It is true that the volume should have been low and the shorts were done at a level where the markets will open a few points higher than that. But it’s quite possible that maybe yesterday was a reversal day. But the prudent action would be to close short positions and not take any positions in the Nifty. Let 5,150 on the Nifty cash index be taken out decisively and that will be a buying opportunity. Till then it’s wise to wait for 100 point band to remain and be choppy. Q: Do you think Reliance Capital could be headed lower? A: Reliance Capital made bearish head and shoulder pattern and then cracked. A lot of stocks declined on their own yesterday but the crack was there on support levels even before yesterday and the confirmation of a bearish pattern had come in. No matter what happens over this gap open there is a sense that at least for the time being high beta stocks are now out of favour. Reliance Capital is a high beta stock, confirmed by a bearish pattern, so one will see follow-through on the downside. If there is a gap up then wait patiently and one can sell at a higher price. Q: United Spirits numbers are expected to be weak today, but the chart also looks weak technically? A: It does and it confounded me by rallying so much which was a surprise. It has been falling for five days; a small support level has already been broken and we have seen that a lot of stocks have reacted badly to their numbers. But the reaction of numbers in case of United Spirits I am assuming will be rather on the downside, which is what we are anticipating this and taking a short position. _PAGEBREAK_ Q: Ambuja Cements did very well; the numbers were good, what is the upside to the stock? A: It is a wonderful chart. I don’t know what is going on in cement, to some extent in ACC and far more in Ambuja. It is making a bullish a pattern at these elevated levels and breaking out from it. It is promising a target of Rs 200 plus. I don’t know whether that is justified or not but as momentum traders we must go long in it. Today, if there is an intraday dip even after the first 15 minutes; take Ambuja as on long position. Q: What about Dabur India? A: Dabur has a good chart. We could not believe that HUL could go up more but it started going up and it never stops, just goes through corrections and goes up. Same story is happening with Dabur and the same story as I had earlier suggested was with Marico. These stocks are apparently being liked by momentum traders, by people who put smart money. Dabur is now at the verge of making new highs. We don’t challenge that. It is also in the right sector at the right time. Today I think there is buying there. Q: Why do you continue to be bearish on Century Textiles? A: Yes, I am bearish on Century, Bombay Dyeing and Raymond, they have some common themes. They seem to actually have made large trading ranges. At support levels they bounce up and at resistance, but in case of Century unfortunately the resistance levels are also coming down. So it does appear that the current levels, the maximum resistance is Rs 300 and now a dip to Rs 250 or even lower is quite possible. I am bearish on it and the chart justifies that bearishness.  It is a sell today. Q: What is your call on Bajaj Auto? A: I have a buy on it and it is a favourite. This stock fell on the day of the results and it has bounced back and that was a strong support. I would have expected that support to breakdown but it yielded a lot of upside optimism and the support held. So any blue chip stock that holds on to support on the back of news is worth buying. It is rallying now; it is not doing anything wrong. I am not worried about valuations which I hear on the channel but the momentum is clearly in favour of buying this stock. Q: Punjab National Bank was the biggest looser yesterday, do you expect to see short covering on that one this morning? A: I expect to see short covering across the board that is why the Nifty is likely to open 80 points higher. So we cannot actually relate yesterday’s prices to what is going to happen today, we have to look beyond today. In case of PNB, it is going to rally like most other stocks but the stock remains a sell because PSU banks have cracked. Leaving aside today, next week also I would assume PNB would be a sell on whatever rise it does. _PAGEBREAK_ Q: Do you take a trade right now on the back of today’s recovery or do you want to wait for a day or two to see what is the right strategy, to be shorting at higher levels because of the weakness or to be actually building longs thinking yesterday’s low was the base? A: We won’t take any trades today because is today a one day wonder? Is it just going to be a knee-jerk reaction to the US world markets and to our deep decline yesterday? Or is it the beginning of a new uptrend? That is the questions we are asking and the answer is not easy because the answer the markets will give. So we have this benchmark of 5150. A close above 5150 will give us the first assurance that maybe this is working out and then probably a day or two of stability above those levels. If that happens then certainly long positions will be justified but today there is no rush going into the market. Q: We saw fund based selling in many of these sugar names, how would you approach Balrampur Chini today? A: Balrampur Chini today would be a sell on rally. It is not just Balrampur, most sugar stocks have cracked and now they are looking towards support levels which are lower. In case of Balrampur it would be Rs 48 and 51, somewhere around that. Since markets are going to open higher, clearly Balrampur will also do so. But this is a sector not just the stock that should be sold at higher levels. If not anything buy Puts, sell Calls and sell Calls because volatility maybe high. Q: For the medium-term would you watch whether the Nifty in this pullback is able to get back to that 5400-5350 level or if it does not would the formation of a lower top worry about the medium-term trend? A: If it does not then the Nifty is making a distribution pattern because it is making a pattern of lower highs, we had 5600 and then 5350. So that would be extremely worrying because 5050 then becomes some kind of base level and anything below that confirms the distribution and then promises much lower levels. I am not saying it will come about but that would be a very big cause of worry if in this rally assuming something starts, if we cannot cross 5350-5400 that will be a very big danger signal. Q: When you say much lower levels, do you mean 4800 could come about? A: I mean we could crack below 4800, we are just doing scenario building, and it is not actually happening. But if we don’t reach those numbers and cross them then we are looking at earlier levels of 4500 not necessarily 4800. Q: We have been talking about some of the metals what is Steel Authority of India (SAIL’s) chart looking like to you, what is the downside? A: The downside in SAIL is bad. Some of these stocks which were giving signs of life have collapsed almost suddenly. I don’t know if SAIL is part of that list that you were talking about yesterday of midcaps being pushed into distress sells. Looking at SAIL’s chart independently, the collapse in SAIL started much before yesterday. It is just getting increasingly bearish; there is no buying opportunity in SAIL. These stocks now have to make those bases that take weeks before we can say buy them. So SAIL now is a sell on rally. Q: Would you sell Ashok Leyland? A: We have been talking about selling Ashok Leyland when it was at Rs 24-23 because the charts had already cracked at that time. A lot of these stocks were already in a downtrend, so you cannot buy stocks that are in a downtrend. The one big message that I am trying to say is that just because they go up today, doesn’t mean we have to buy them. It still means we can sell them on a rally. Q: Any improvement in the Jet Airways Charts? A: Jet Airways has been relentlessly falling day by day and that is not the sign of a stock that is correcting. It is a sign of a stock that is probably beginning a new downtrend. Disclosure: I have no holdings in the stocks discussed.