Mildly bullish in short-term; hope for a rally: Sukhani

Technical analyst, Sudarshan Sukhani, s2analytics.com is mildly bullish on the index in the short term. However, he cautions that the trend continues to be on the downside.

"The market is holding on to the lows that it made on Thursday. If those low hold and the first sign of life is coming in the Bank Nifty then it is worthwhile taking a long trade," he said in an interview to CNBC-TV18.

According to Sukhani, there are enough signs suggesting that in the short-term the market is slowly bottoming out. So, he expects to see a rally in the next few days.

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Below is the verbatim transcript of Sukhani's interview with CNBC-TV18.

Q: What approach would you take this morning on the index?

A: I would be mildly bullish and this is about the index, the short-term view. The trend is down. I do not think there is any confusion on that. We are going to see lower levels as time goes by but for the short-term trader the question is, is there a possible tradable rally on the upside. The keyword here is 'tradable' and that maybe, we do not know but we just have to take a view that the market is holding on to the lows that it made on Thursday.

If those low hold and the first sign of life is coming in the Bank Nifty then it is worthwhile taking a long trade. At the worst we will get stopped out and that is something that we have to accept. At best we can see a rally that begins slowly and then gain momentum over the next few days. So, I would go for a rally. There are enough signs to suggest that slowly in the short-term we are bottoming out.

Q: You have picked Mahindra Satyam?

A: The charts have turned nice. It came in our buy list much after the rally had already started. Mahindra Satyam is doing all the right things to go higher than Rs 120-125 resistance barrier. Yesterday it could not succeed in doing that but it will do that and that is the sense I am getting. There is also a theme here. A lot of midcap IT stocks are now giving us very attractive chart patterns so it is not Mahindra Satyam alone. I think it is also being supported by a theme that is developing. Mahindra Satyam’s eventual intermediate term target should be more than Rs 150. I never thought I will see the day when Satyam trades Rs 150 again but it is going.

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Q: You have picked MphasiS as well from that list as well?

A: Yes, MphasiS is making a small micro double bottom and coming out of it. It has confirmed that pattern and the sense is that a decline in MphasiS was primarily a correction rather than anything else. Since it is not MpahsiS alone because we could not fill the list just with IT stocks, the diversification is necessary. It is also Geometric, which is giving us a same pattern. So, MphasiS is one of the better buying opportunities for the day but midcap IT stocks should be focused on for long side. 

Disclosure: I have no holdings in the stocks discussed.

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Q: You are cautious on Pantaloon Retail?

A: It is a matter of regret. When Pantaloon was up, we were tracking it, making money on the long side and then suddenly the stock collapsed. It then broke below a support level yesterday. Yesterday so much carnage happened in midcaps, which was not reflected in the small loss we saw in the Nifty. However, midcaps were literally plummeted yesterday. Pantaloon, the fact that support levels are breaking down, suggests we should be short in it. If any rally starts it is unlikely to start with midcaps, it will start with the blue chips.

Q: What about Jain Irrigation Systems, over there as well more downside?

A: Yes, it is one of those stories. Jain Irrigation gives a sense that it is in a trading range and may be a rally is starting and then another big decline and then a failure to cross its earlier support levels, which is now acting as resistance. In many of these midcaps, it is difficult to identify downside targets because the targets are so much lower and we have to ask ourselves is it possible that the stock can fall so much? Unfortunately we do not know the answer but we cannot buy. It is still a short sell; I think it is going much lower.

Q: From the largecap basket you have picked Bharat Heavy Electricals (BHEL) and Rs 200 generally has been a reasonably good support for BHEL, you think it will get through that this time?

A: It seems so because BHEL was bouncing in that Rs 205-208 zone and Rs 200 was the last support level. For two days now consecutively it is falling below Rs 200 and that is not a good sign. It should have stayed afloat and tried to cross its resistance. It is difficult to say what will happen but Rs 190 is an achievable target on the downside. If it does not happen in the next couple of days, it will happen whenever the broad market starts coming down. The stock is collapsing now.

Q: You have a buy call on Mahindra and Mahindra (M&M)?

A: M&M has seen a strong support zone in Rs 860-870 area. It has been bouncing again and again. We prefer to be in blue chips on the long side and that is where money will come. It is boring to buy a blue chip but it is profitable. If the Nifty rallies, if the Nifty remains steady then chances are that M&M could see at least a small intraday rally. So, the positioning should be we are going to buy M&M in the day whenever opportunity comes.

Q: Any intraday trade you would setout on the Nifty with a long bias. We seem to be indicating a start that is up about 20-25 points?

A: Yes, after the first five-seven minutes of cooling off I would be a buyer in the Nifty. The key here is, we just want the market to take out what the first five-seven minutes of high are created with, which means if the momentum continues to be strong then buy the Nifty. This is a day trade to start with. If it does not work out, it does not work out. However, I would expect some kind of bottoming out process in the short-term to have begun.

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Q: How long do you see this respite lasting and do you think we will make it all the way up to 5,900 or this pullback can be aborted before that?

A: At this point it is not easy to say that. The market momentum suggests that 5,900 is a distant dream. However, market gather momentum as they start going up and then suddenly a lot of views will change. This was a correction, we have seen the bottom. That sort of thing will happen. Once we start hearing these words then I would expect that the market can go to 5,900 but I am quite sure that whatever rallies we see, are selling opportunities, on that there is no confusion.

Q: What do you see on the chart of Jaiprakash Associates because there was hope that the stock has seen a bottom at Rs 70-72 but yesterday it crumbled to Rs 68 again?

A: It crumbled again and it is breaking the earlier lows and that was Rs 67-68. It is one the verge of a decline. I would say that any rally in JP Associates is a selling opportunity. It is not a buy. The charts are suggesting a much lower target level of Rs 50 by the time the market ends. Therefore, I would not want to buy it.

Q: Your thoughts on Amara Raja Batteries technically?

A: Amara Raja is one of the better players. It was in a correction when the market was falling. That correction seems to be over and it is getting at a lower price than the highs that it was making. So, one of the few stocks that could be considered for buying at current levels assuming the Nifty does not fall and collapse, this one should go up.

Q: Have you had a look at Jet Airways and SpiceJet?

A: I still remain upbeat on Jet in spite of the sharp decline we have seen. That could simply be construed as a correction rather than a downtrend because Jet’s rally was significant, it has doubled itself. So, a correction will be sharp. I am upbeat on Jet, not so upbeat on SpiceJet. Jet Airways is a positional trade. One cannot day trade but I would be a buyer here.