Nifty may see 5500; traders be on short side: Sukhani

Technical analyst, Sudarshan Sukhani, s2analytics.com shared his outlook on the market and how one should trade it post-Budget. He also spoke about stocks across various sectors.

Below is the verbatim transcript of Sukhani's interview with CNBC-TV18. Q: It is a new series. How do you approach the index this morning? A: Before we talk about today’s index, I must explain some of the context in which charts needs to be examined and all trading should be done. The first sell signal was given when the Nifty was at 5,980 and that was an aggressive sell signal. A confirmed sell signal was given when the Nifty crossed 5,940. At that time, even I would think 5,940 has already come. The Nifty is down 200 points. How can we sell here? But that is what we should do because momentum was clearly down. Since then we have fallen 300 points of course most of it is in yesterday itself. The downtrend was clearly visible and discussed on this channel repeatedly. Market takes this trend and if a trader challenges it then the trader falls into trouble. Short-term trends are much more difficult to predict and obviously they get far more influenced by news, by perception, a day-to-day trend is different. The downtrend continues. That was the context. A downtrend has started, the last support level at 5,780-5,800 broke in the morning yesterday when the Finance Minister (FM) had started his speech and that was the trigger this support is not holding. If this support is not holding then the next one comes somewhere around 5,500. I would assume, we have discussed this number earlier but now it seems reasonable to expect that the Nifty will reach 5,500. How it reaches, that is different. Traders should be positioned on the short side. They should not give up their short positions. A small rally should be part of that hit that traders expect. They have to bear. However, short positions are justified till support is reached and that is now 5,500. Budget Reactions: There will be no major uptrend soon, says Udayan Q: In case of a rebound at any point because sometimes even downtrends are punctuated with pullback rallies. What do you think is the level of resistance, which the Nifty might struggle to cross? A: A rebound is possible and this oversold market can easily have one. The bear market rallies are vicious, they suddenly come, appear and they are far stronger than one would expect. A strong rally can take us back to 5,900. I wouldn’t be surprised. If that happens then – of course we discuss it everyday – but at higher levels we must build short positions again. It is difficult to say whether we will reach 5,500 or we will consolidate and then come to 5,500 or we will rally. However, from current levels a rally to 5,900 seems difficult; from 5,500 it seems much easier. Q: You are selling Allahabad Bank today? A: Yes. The short-term trades on the short sides are likely to make more money except for a stray day when the market will go up in a rally mode. Allahabad Bank has now fallen out of another trading range yesterday. All the second tier public sector undertaking (PSU) banks are selling opportunities. We chose Allahabad Bank because it had the best chart for selling. Disclosure: I have no holdings in the stocks discussed. _PAGEBREAK_ Q: How would you trade Jubilant Foodworks? A: It is coming down. First it made a bearish pattern and we said to sell it. Yesterday it made another one and it is a sell again. Jubilant is difficult to trade on the short side because of snapback rallies that it gives. It comes back again. This time it is doing that. So, ideally take a position if there is a minor uptrend. That is the ideal way to sell it. Q: You are selling Shriram Transport Finance Corporation as well today? A: That is a disappointment. This stock has rallied from Rs 500 to Rs 750 and we thought this is in a strong uptrend but it has made a rounding top, it has made a bearish pattern, bearish head and shoulder, broken down from support levels and that is the worrisome story. I have said this earlier. The best stocks are now breaking down. It is a short sell now and because of the quality of the stock traders should expect some gains here but I would expect it to come down. Q: You have a buy call on Havells India? A: The buys need to taken in context again and we will buy Havells only if the market is not falling anymore today. Havells is one of the outstanding performers. It is an outperformer on the long side. It sometimes goes up when the market comes down. That is a watch list. What will we buy today if the market gives us an opportunity and Havells will be the first of them.  Q: ITC is also a buy? A: ITC is a far more interesting buy. At Rs 290 the stock is finding a lot of support so we have a tight stop loss and context is very important. We cannot go buy at 9:15 am or 9:20 am. We have to let the market what is the view for the day and for Monday. If the view becomes mildly bullish, ITC among the heavyweights is a perfect buying opportunity.  Q: Your views on Bank Nifty, which was under immense pressure yesterday? A: It is going to 11,000. It is not going to do it immediately but very soon. It is the weakest of all the indices and all bank stocks are short selling ideas. Do not try to catch falling knives here. Q: This morning will you wind up your short position or would you stay with them? A: I will stay with them. I am prepared to take 150 points of hit on the short positions. This market is going down and we keep on winding up the short-term positions in any case. That has been done yesterday. However, new positions should be reinstated if there is a rally. There may not be one and that is a different matter. Q: In case of some kind of a bounce back, positional trades aside for short-term traders at what kind of junctures would you be looking at either taking any fresh positions? A: Today I would be very wary of taking any positions as a day trade, a long or short. Market could be choppy. Therefore, the key here is, is momentum now favouring the bulls. If on Monday we see some kind of a starting gain that will be the point. We do not have a level. We have momentum. We need to see momentum start moving up and one day is not enough so today should be ignored.