Nifty's current run may see it glide to 5480: Sushil Kedia

It has been a rangebound and fairly resilient last few days of trading on the Indian bourses. Sushil Kedia, President, ATMA finds that such markets are difficult to trade because you have got to play counterintuitive, counter logic and countertrend moves. He believes pullbacks are to be bought at least for the next few days.

He classifies yesterday’s Nifty movement as a B-wave which is a clear warning sign that this uptrend is not yet over. “So the downdraft that we see today is to be mentally termed as a pullback which may find support at about 5,270 which means you keep a stop under there and watch for intraday patterns that allow you to make a new long trade entry,” says Kedia.
He sees this current phase of the Nifty gliding all the way up to 5,480 almost. Below is an edited transcript of his interview to CNBC-TV18. Watch the accompanying video for more. Q: What have you made of the kind of rangebound but yet resilient trade we have had so far? Which way do you think the index is pushing now? Is it headed for a correction or another up move?
A: Markets will do different things on different timeframes. The high that we saw yesterday on the Nifty towards the close is classified as an irregular B-wave which is a clear warning sign that this uptrend is not yet over. So the downdraft that we see today is to be mentally termed as a pullback which may find support at about 5,270 which means you keep a stop under there and watch for intraday patterns that allow you to make a new long trade entry.
Should those patterns not come you don’t make that long trade, or if 5,270 breaks the next level which looks unlikely to be achieved right away is about 5,150. Gunning for a long trade to be picked up closer to about 5,270-5,280 whatever, I think yesterday’s high is going to be clearly surpassed for sure and even then one more round up and then maybe a move that can go down to 5,150 still does not tell you that the uptrend is over.
This current phase of the Nifty might allow it to keep gliding all the way up to 5,480 almost. As you rightly put it, rangebound and yet very resilient. So such markets are difficult to trade because you have got to play counterintuitive, counter logic, countertrend moves and pullbacks are to be bought at least for the next few days. Q: What would you play it for on the upside if indeed the stance should be that this is a market that’s pushing upwards? Beyond this 5,300 mark, what kind of potential do you see on the Index?
A: If I get a buy pattern during the day today or early morning tomorrow without going under 5,270. This movement since the last one day is an irregular B-wave, so somewhere closer to the origin where there are multiple supports. If I am going to look for a long trade here upon confirmation of intraday patterns, I am looking for a bounce to go back again and go up to 5,380 or more.
Should this break, even if it comes here, I am still looking for a move all the way to 5,480 in which sequence this combination will pan out. I think over the next four-five-seven days maybe, until I find completely contrary intraday patterns, my stance is this market is good for 5,480. Q: How is this tying in with global indicators?
A: That’s where the biggest challenge comes in the last two years and not only just Nifty playing out of sync with other global markets. When you look at the Shanghai Composite it’s almost scraping the bottom of the barrel, at the same hand market which should have been mimicking quite a bit of the Shanghai Composite, the Hang Seng index is in a very late phase of the rally, very similar to the European markets and the S&P 500.
Different markets are doing different things. Traditional wisdom has been that correlations become extremely strong when bad times are to begin and they generally tend to be loose when they are good times. I would say in the current state of the world, this is neither a ramification of extremely good times coming around, or very bad times coming.
I think the global markets are disintegrating the extreme bearish consensus that had been formed and as that will wallow away, we will chug along and different markets will keep going through their different short-term orbits over the next three to eight weeks, four to eight weeks perhaps. The final bloodbath for the year is still pending. The consensus is just getting disintegrated over the next one to two months. Q: Do you feel that would come with a big move on the currency market as well?
A: Yes, I track almost all of the key components of the dollar index. If I am going to pull-up the monthly chart, taking a very long-term view of how the dollar index has behaved, we have been in a 10-12 year kind of a bearish phase, within which the last four-five years is more like a sideways consolidation over a 15-year bear market, within which the current regime that started at about 72 is just another rally happening within this larger pattern which can go back and retest maybe the 88-89 area.
Looking at the weekly level detail, this rally that happened was a wave A, this is a wave B and this wave B is to be classified as an X, sorry for those who do not know Elliott Wave analysis, but there are lots of them who understand it and this current phase is again an ABCX and what is panning out here should very likely be a five part move, out of which 1, 2 have been done, 3 and this fourth is coming by.
Perhaps without going under 80.8 the monster rally should resume again going to 88 and within the very short-run an A has happened, a B is happening, perhaps by tomorrow morning you will see dollar index starting to glide down lower again and those four-five days of glide down to 80.5.
I am unfortunately trying to again draw very close correlations which are actually not working that’s where Nifty might find its space to go to 5,480 and the S&P may not really be going down but wallowing sideways or slightly trying to test the recent highs. Independent of the thesis that I proposed about how equity markets are going to function, the dollar index looks good for 88 without going under 80. Q: A word on two heavyweights and how you would approach them in trades - Infosys and Tata Motors?
A: Infosys is wallowing under that large gap of Rs 2,550-2,570 area. I would say until that is taken out, it is time to definitely disown long positions. Triggers for entering short positions for immediate gains are not yet in place but the bias clearly remains to wait and watch and enter into a short trade on Infosys with a stop above Rs 2,570.
On Tata Motors, I think Rs 254 that we recently saw is an intermediate top we made under a key support of Rs 256. The support has now tested into a resistance and the current rally is a complex one. I can’t place my finger on saying right away that this rally is over and we will not retest Rs 254.
You will have to keep a margin of error all the way up to Rs 256 to keep building your short positions in chunks and pieces. Perhaps with the expected behaviour of Nifty over the next five-eight days, there are going to better prices seen in Tata Motors. I am going to be looking for shorting Tata Motors with targets below Rs 200 and my stop can’t be lower than Rs 256. Disclaimer: The above views are the personal analysis of Sushil Kedia, President ATMA and do not  reflect any opinion of ATMA To know more about ATMA, please visit http://www.atma-india.net/