Short if Nifty closes below 5880 today: Sukhani

Technical analyst, Sudarshan Sukhani of s2analytics.com recommends traders to initiate short positions if the Nifty closes below 5,880 today.

However, even if the market bounces back from the current levels, one should not to take long positions. "The market will continue to remain choppy if it tries to go up and probably a directional if it tries to go down," he adds. Below is the verbatim transcript of Sukhani's interview with CNBC-TV18. Q: How would you trade the index? A: The index has been choppy and we can now define a level below which we can start initiating short positions and that is about 5,880. If the Nifty is closing below 5,880 then I would be a seller in the Nifty. I will assume that the correction on the upside is over. Obviously we do not know for certain so we will keep a stop. However, we will still take the trades, start with small volumes. Square-off longs, short Nifty between 5950-6000: Bhamre The other scenario is that this market could again bounce back. If it does then we will step aside and not take any long positions because the market will continue to remain choppy if it tries to go up and probably a directional if it tries to go down.  Q: Titan Industries has been trending lower, what kind of levels do you see here? A: We are now looking at Rs 220 and that is a target that should come. For the bulls, Titan is a bad chart and for the bears, the charts are excellent; lower highs, lower lows, repeated breaking of support levels and Titan was a short candidate when it started its descent below Rs 300. It is now at Rs 240. The market does not like these stocks and chances are that much lower levels are coming.  Also Read: Dalton sees little upside above 6K; max 15% returns this yr Q: You have a bearish call on Tata Chemicals too? A: Tata Chemicals made an intermediate top and started a decline. That decline could have ended because it was standing at support, but that is not working out. A small three day rally essentially seems to be a bearish flag. That suggests that Tata Chemicals eventually will crack Rs 300 and go much below. Before the rally started we talked about the intermediate declines, which were coming on charts. They are now reasserting themselves. Disclosure I have no holdings in the stocks discussed. _PAGEBREAK_ Q: Jubilant Foodworks has been moving quite well. It is up some 10-12 percent in the last seven sessions. A: We are looking to buy it. This is a stock that does strange things and it is fairly unpredictable. The fact that it is rallying probably also means that a lot of shorts have been caught on the wrong side. Maybe this is a genuine rally. It is now on the verge of breaking out from a strong resistance level. Given the market choppiness, Jubilant is a buying opportunity when and if the Nifty supports it. I do not think it is going to do its bit alone. However, if the Nifty is stable then Jubilant Foodworks is probably a much better opportunity for the day trader. Q: You are buying Sun Pharma Advanced Research Company (SPARC), one of the smaller pharma names? A: That does not usually come in this list. SPARC had a very nice rally to Rs 140 and then a deep correction. That seems to be a correction rather than a downtrend. That correction has entered into a trading range. It is on the verge of breaking out above that trading range. The first challenge then could be easily all the way to Rs 140. One cannot buy it in the Futures and Option segment, so this is essentially a cash stock. That is not bad, because you are putting your money, there is no leverage, so there is much less risk. For people who are looking for positions SPARC is an excellent opportunity. Q: How would you trade ITC today? A: If the market is going up then ITC is going to participate. ITC has corrected as much as it should have and it is a very choppy chart for ITC. The selling probably was finding support at every level. So, ITC is a buying opportunity. The market could give both sides of the movement today and tomorrow maybe for the next few days and if the markets give a sense of rally what is it that one want to buy? At least for a couple of days ITC should be on the long side list. Q: You have a sell call on Gujarat State Petronet (GSPL)? A: GSPL is again one of those erstwhile favourites that is keeping on coming down like Titan Industries, although different sectors. It makes lower highs, lower lows. It made a very small flag and then it promptly broke down from that flag suggesting that much lower levels are coming. I am amazed sometimes what is happening to these midcaps and how a chart can predict so much lower. However, that is what is happening. It is a positional short. One can short it for the day and look at is as an intermediate term position also. Q: How would you approach things on the index if it get sub-5,900 opening? A: I would wait for the first customary 15 minutes and if the market remains below 5,900 then I would begin to take short positions. These would be intraday positions because if the market closes below 5,880 and if the close is there then I will add to it. Intraday trades have their own plus and minus points so traders should understand it. However, the bias now appears to try and see where we can go short. Q: Where would you keep a stop loss on the short trade in case the market turns against you? A: The stop loss is easy this time. We have had a high and that is about 5,960. Therefore, we will add 10 points to it. 5,970 is the stop loss for any trade. It is tight; it is not even 100 points so the risk reward is favourable. Even if we get a small slide, it is worth it. _PAGEBREAK_ Q: Is this what you would classify as an aggressive trade, as in start with small positions and then add or you are convinced of the direction? A: It is an aggressive trade; start with one position and then keep on pyramiding if the market goes in our favour. If it does not then we get out with a small loss. We do not mind that, which means the level of conviction is not high enough to justify a larger volume. We want the market to suggest that the conviction rate should be in our favour. It has to keep on sliding, even slowly.  Q: At this point would you take any positional trade for the series or is it too volatile even intraday to be able to get that kind of direction? A: The position trades would be taken on the short side if the Nifty continues its slide with a full understanding that they may or may not work out because even if the market begin a process of distribution at these higher levels that process will entail the Nifty going higher also; it could cross stop loss level, touch 6,000 and then bounce back on the downside. So, there is a risk. However, with understanding that risk we will try to start building up short positions. Q: Two heavyweights that seem to be promising of leadership but they are struggling again, Reliance Industries and Oil and Natural Gas Corporation (ONGC)? A: If this market is to go up the Reliance should have gone up. It has not done that. ONGC is in a slightly better shape than Reliance's chart. Reliance is in terrible shape. It has given up all the gains that it had seen. I cannot make a comment on it. All I can say is that it is not doing what I would have expected it to do. Long-term charts show a lot of strength but in the short-term even buying Reliance is not justified. Buying ONGC is not justified because the Nifty needs to go up for us to switch from ONGC to Reliance and get more beta. However, that is not working.   Q: How would you execute that short trade that you spoke about? Would you just be shorting Nifty Futures or would you buy a Put option and then see how that shapes up? A: We will buy Put option. The 6,000 Puts, these are deep in the money Puts but the advantage of a Put option is the inbuilt stop loss that comes with it. One cannot lose more than the cost of the Put. That enables us to sustain any short-term aberrations in prices on the higher side and that is the recommended strategy for viewers, for traders; rather than shorting Nifty Futures consider buying March Puts, both are good enough, 6,000 for those who  are conservative or 5,900 for aggressive traders. Q: What kind of action do you see from midcaps now in the context of a Nifty, which has turned volatile? A: Some midcaps are likely to give us rewards on the long side. The problem with midcaps then becomes that if universally the sector is not going up and the Nifty is not going up then selection and identification of midcap is not easy. During the day one will say that a particular stock has gone up 6 percent but there was no inkling before it started going up that this is going to go higher. While I assume some midcaps are likely to do better, I do not see anything on the charts that enable us to do good identification. On the short side the names, which keeps on coming in and which are discussing. A lot of midcaps on the short side are available. Q: Mostly from high beta, these shorting candidates? A: Yes, mostly from high beta and all of them made small rallies, the rallies have failed given the shape of a flag and that suggests that the downtrend is just midway. There is another half on the downside, stocks like Century Textiles and Industries, Raymond even metal stocks like Hindalco Industries, Sterlite Industries, GMR Infrastructure, IRB Infrastructure Developers, Titan and a lot of the names, all of them are shorting candidates.