See further declines; Infy, TCS to aid down move: Sukhani

Betting on a bearish move, Sudarshan Sukhani of s2analytics.com tells traders to look for shorting candidates if the Nifty breaches 5,270 today.

Speaking to CNBC-TV18, Sukhani says that a move back down to that level will indicate that further correction is on the cards for Indian equities. “This time if the Nifty touches 5,270, it is not a buying opportunity because it’s come here repeatedly and it is going to come here after a failure to cross resistance,” he said. Furthermore, he believes the two IT majors reporting today, Infosys and TCS, may add fuel to today’s down move. Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: What is the trading strategy for Nifty this morning? A: The trade is to see if there is a short candidate in the Nifty. The ideal level to go short would be if the Nifty breaches 5,270. This time if the Nifty touches 5,270, it is not a buying opportunity because it’s come here repeatedly and it is going to come here after a failure to cross resistance. So I would be a little bearish at this point assuming that the correction that we are talking about could well be starting. We also have two IT majors reporting and that correction could be accentuated or pushed by them. Q: You are selling HCL Technologies today? A: The charts of HCL Tech are not nice and it suggests that Rs 500 is a strong resistance and I do not see it crossing that resistance. Yesterday it was weak. I am assuming that whatever happens today and in the next few days will not be conducive for IT stock prices. In context as well as on the independent charts of HCL Tech there is a significant downside available and there is no upside. If nothing happens the trade will not go wrong. It won’t lose. But if something happens and goes wrong there is significant downside moves in all the IT majors now.     Q: Would you still buy Larsen & Toubro (L&T) at Rs 1,430? A: I would buy it because it is now making new highs for this bull market, this uptrend and new highs must be bought. It’s a nice chart. It rallied from Rs 1,100 to Rs 1,400 but the context must also be available. If the market remains stable then only any kind of buying would be done. It’s in the list but the market will suggest whether to buy or not. Q: You are going with a buy on BPCL? A: BPCL is a better stock and it does not require Nifty context to buy it. It’s making bullish head and shoulder and now breaking out of it. It maybe suggesting that crude is going to remain where it is or even come down and that would be interesting to see, a relationship between crude and BPCL in this form. But the chart is suggesting that no matter what the Nifty does there is a buying opportunity in BPCL.   Q: You have Raymond in your sell list? A: Yes and that is a disappointment because after reaching Rs 400 it stalled and the chart pattern of Raymond now suggests that some kind of a distribution is going on. I do not know whether that distribution is going to continue and become a decline or just a correction. But it’s dismal. So Raymond has to be sold into. Q: You think there is more downside in Hindalco? A: Hindalco has reached the resistance level of Rs 125-130. Hindalco was never a bullish chart, it was a relief rally. My sense is that the relief rally is over, it's going to resume its downtrend and if that is so then one is selling almost at the top. Today assuming that the markets are likely to remain weak Hindalco is probably an appropriate candidate for a day trader and for somebody who wants to build positions, begin now. Q: You like the chart of Biocon? A: Biocon has rallied from Rs 200 to Rs 240 and that's 20%. It probably has completed its downtrend, a bear market or whatever. Now this rally is likely to continue, for the last 4-5 days we saw Biocon in a trading range. This is a stock that does not need a context in the sense even if the Nifty were to chop around or come down Biocon could surprise on the upside. One should be buying Biocon with the slightest sign of market stabilizing. Biocon is now getting ready for big moves on the upside. _PAGEBREAK_ Q: It seems likely that we will hit the level of 5,770 that you were alluding to. Would you look at initiating shorts? A: I think we are now certainly heading for a correction. The target could be 5,200-5,100 but certainly lower than where we open and short positions are justified. Q: Where are the supports on Infosys if it opens gap down today? A: The support comes at Rs 2,200. It’s difficult to say what will happen today. Q: A word on the IT index? A: There was suggestion earlier that one should short it. We have been selling Wipro and HCL Tech today and the IT index is heading much lower. Q: Any targets on Infosys and TCS for medium-term because the one day performance for Infosys tends to be very stark but then the stock slowly recovers? A: The strong support is at Rs 2,200 in Infosys which is roughly where it has found support today. But since the markets are unpredictable if Rs 2,200 breaks then there is nothing in Infosys till Rs 1,600. I cannot make a call whether Infosys will slide further and go down but the trade here would be to short it further if it cracks Rs 2,200. Q: For the market at 5,250 - what kind of targets are you playing on the way down for the shorts that you might have opened up this morning? A: We have opened up short positions and we will add to it if the market continues its slide down and could be little choppy again for today or tomorrow, try to recover. But we are looking at 5,100 to 5,150 band as the downside target for this current down move.  Disclosure: I have no holdings in the stocks discussed.