Market may become 'untradable'; buy on deep dips: Sukhani

Technical analyst, Sudarshan Sukhani, s2analytics.com believes the market is near a very strong resistance zone, however adds that does not mean the index will stop here. He says chances are that it will become very choppy and essentially untradeable.

"One will have to buy on deep dips and that is the trend. The short-term trend is up but till the markets do not consolidate, the easy money has gone out of the trend," he said in an interview to CNBC-TV18.
 
Below is the verbatim transcript of Sukhani's interview with CNBC-TV18.

Q: How you are trading the index at 5,900 plus zone?

A: We have had a very good run on the index, caught it at the lows and my suggestion was to exit all short-term positions on Friday afternoon. So, I would assume that traders should now be out or they should plan to get out of the long positions. We are entering a very strong resistance zone that does not mean the index will stop here. The chances are that it will become very choppy and essentially untradeable. One will have to buy on deep dips and that is the trend. The short-term trend is up but till the markets do not consolidate, the easy money has gone out of the trend.

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Q: You are long on names that are recovering like Jaiprakash Associates?

A: Yes and that is a surprise after seeing JP Associates and selling it and going short in it. For the last three weeks JP Associates has been making a small base, I like stocks that give us base breakouts. The building of a base tells us that the selling has stopped that has happened in JP Associates. This could probably be short-term; I am assuming it is because even the Nifty I assume will eventually face resistance. However, for the time being JP Associates is a buying opportunity, a breakout from the small narrow base tells us there is more upside here, momentum stocks should be bought into. We have been upbeat on midcaps for the last seven days that sense continues.

Q: No recovery visible in Voltas?

A: No recovery because Voltas is just going one way, sliding down, a two day small rally that gives the impression of a small bearish flag rather than a base and then a breakdown from that, that is a pity. Some of these big favourite capital goods names like Voltas, Crompton Greaves are suggesting that much lower levels are coming.

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Disclosure: I have no holdings in the stocks discussed.

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Q: You are cautious on Century Textiles and Industries?

A: It is not just cautious; we are aggressively suggesting going short in it, even in this market. Century and Raymond saw big rally and then almost a V-shaped decline started. They were going up and one day the stock came down and then it never stopped. So, Century Textiles is in some kind of a bear market. It is not a correction. It is breaking all earlier lows. Therefore, it is a continuation sell. A small rally was there because everything was going up. That rally is over. Sell it.     

Q: You are long on Hindustan Petroleum Corporation (HPCL)?

A: Yes, even Bharat Petroleum Corporation was a buying opportunity last week and HPCL is now joining that party. It seems that the decline in oil marketing was essentially a correction. That correction seems to be getting over. Small bases but they are finding support at lower levels, repeatedly bouncing from that. So, a small triangle breakout is also visible here. All of this tells us that oil marketing is probably at least for the time being moving up. There is a momentum trade here. So, we are only talking about taking short-term trades. I think it is worth buying into.

Q: You are long on Idea Cellular today?

A: Yes, Idea was in a correction of some kind. That correction ended on Friday. We have tried to buy Idea earlier but the correction was going on. So, sometimes one take the trade and that do not work out. However, the trend is intact. In case of Idea the uptrend is very much visible, all dips should be bought into. I would assume that the rally should renew itself today; not only in Idea but also in Bharti Airtel but today perhaps Idea should see a bigger follow-through.  

Q: How would you trade Cipla?

A: Cipla is a far better chart. The decline in Cipla and a bullish pattern that has emerged, has given a breakout. Therefore, Cipla is not only a day trading opportunity, it is a position trade. Buy Cipla in equity and hold on to it but probably going back to Rs 410-415 levels or buy Futures, buy Calls. Keep on buying and selling. Try to be on long side in Cipla, it is beginning a new uptrend.

Q: Looks like it will be a quiet kickoff for the Nifty?

A: Yes, and likely to be choppy and there is nothing to trade here. Only day traders and short-term traders should take one or two trades in a week, even if there is nothing, will look to buy dips. However, the money was made when the market fell and then went up. So, if one do not trade will save that money.

Q: How would you trade Rural Electrification Corporation (REC), which looked vulnerable on Friday?

A: Yes, it did and we had a sharp rally but that rally stopped short of the earlier highs. So, the pattern of lower highs-lower lows is being maintained. REC would then be a short sell. It is difficult to get good trades in choppy market, which is what I think we will enter. So, short selling should also be done carefully. Keep a stop loss in any case.

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Q: Larsen and Toubro (L&T) in focus this morning. What are the key levels to watch there?

A: The Rs 1,500 level is critical for L&T. Let it fall this morning, does not matter. However, if the stock starts rallying, any breach of Rs 1,500, any breakout from Rs 1,500 is a significant buying opportunity. Therefore, I would be a buyer here. 

Q: What about Orchid Chemicals and Pharmaceuticals after last week’s 40 percent dash?

A: It means nothing. We have to see in the context of the big declines it has seen. The 40 percent comes from lower base. I would be a seller here, not necessarily today but when the stock starts showing the first signs of weakness. We will assume the trend is down.

Q: How would you trade a stock like Ambuja Cements?

A: I was assuming that cement is bottoming out but that process has not yet started. Ambuja is a short sell. It has broken the earlier lows. It is probably looking towards Rs 175 or even Rs 160.

Q: When would you take your next trade on the Nifty? Would it be if the Nifty crossed over a certain point on the way up or are you waiting for a dip to a certain level before you have a comfort of taking a long trade?

A: I am waiting for a dip and I would be happy to take a long trade. I do not have a level and perhaps the levels will come in the next one-two days. Therefore, as of now the trade is to go long again but it is difficult to quantify. The idea is to wait for a couple of days to let the Nifty decide what the levels will be.

Q: How would you trade LIC Housing Finance technically?

A: This is a good stock. The dip we saw was a correction. All the earlier lows and support levels have been maintained. We want to buy it. It is a positional trade but it is not a day trade.

Q: Would you buy the pullback in Jindal Steel and Power (JSPL)?

A: No, I would not. It is a short sell. Do not sell today because there was a big upmove on Friday but once the stock shows signs of sagging, the rally starts getting tired. It is a short sell. The stocks that are fallen much, do not suddenly enter a bull market.