Market on verge of breakout; take long positions: Sukhani

In an interview to CNBC-TV18, Sudarshan Sukhani of s2analytics.com says an expiry day usually creates some volatility so it’s wise to step aside. This June series however, the last four days has already seen subdued volatility. So even without expiry, the market would be expected to move in some kind of an expansion. Today is an exception.

He is planning on taking long positions in the market now. “We are on the verge of a breakout. I am assuming that the breakout will come about, if not today then soon enough. Also Read: Indian market outlook ahead of the EU summit Sukhani’s intraday idea for today would be to try and buy once the 15-20 minute prices are in place. “That’s the strategy and if it works out, then we will carry the positions,” he adds. Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: You think Rural Electrification Corporation (REC) is good for more? A: I think it’s good for more. It seems that the bear market in REC is over. It made small base around Rs 150-170 range. It’s broken out of that base. That is a reversal pattern so one had a decline; one had an accumulation process and now probably in the run-up phase and the prices should go significantly higher. So the idea is that REC could surprise today also because of the Futures & Option (F&O) dynamics but otherwise it’s a positional trade also. One could buy it and then hold on for few weeks and probably come out well. Q: You have picked Lanco Infratech from infrastructure? A: After having being downbeat and bearish on Lanco for long this stock is now bottoming out. The process suggests that it falls, it rallies and it falls again but holds on to support. The stocks that have fallen so much are holding on to support and should be considered for buying. The entire infrastructure group is doing that. It seems yesterday Lanco had a narrow range, apparently it’s been in a very tight range for the last six-seven days and a breakout is imminent. The breakout could come on the downside but its very unlikely that these stocks at current levels will further breakdown on the downside. So this tight range should get resolved on the upside. This is a good time to buy. Today maybe the day when it breaks out or maybe tomorrow but one should be positioned on the long side.  Q: You have been cautious on banks but you are buying Dena Bank today? A: I have been cautious for the last two-three days because banks did topsy-turvy movement. But I think banks are again in an upbeat stance, the correction at least for now is unlikely to come. So banks should be bought into. I am long in the Bank Nifty since last two days. Public sector undertaking (PSU) banks are now going to do what they did in 2006-2007 that is significantly outperformed. Dena Bank is poised for a short-term trade on the upside. It’s in a narrow range. It’s willing to breakout. I am assuming that all these breakouts will be on the upside. So Dena Bank is likely to be a short-term out performer among the PSU banks. Q: You think IDFC is good for more? A: It’s good for more. IDFC is an example of how technical traders can change their views based on chart patterns. We were bearish on it from Rs 200 downwards but at this point it seems that the downtrend is over. It made a bullish head and shoulder pattern. It’s broken out of it. Yesterday’s gains are continuation of what is likely to be a significant upmove. Obviously that upmove will take its own time but for the next near-term IDFC is good for more before it consolidates or even decides on a correction. Currently it should be bought into. It’s one of the better stocks now. Q: You would be selling the Tata Motors’ differential voting rights (DVR) this morning? A: Yes because the Tata Motors DVR had worst day than the equity. So while I could give some justification and say for the equity the process of bottoming out is going on. For the DVR it was very unusual to see this big cut and it has already come to its lows that it made while the equity hasn’t done that. So there is a sell in the DVR. The point is that if the market remains cheerful in the morning then no need to go and take a short position. But this is a potential sell. If the markets become choppy we will be looking to sell it. Q: Chambal Fertilisers and Chemicals is also a sell in your books? A: Yes it is a sell Chambal keeps on giving an impression that a breakout on the upside is imminent and then it retreats back. Now it’s in a trading range but in that trading range it’s at the verge of a breakdown. So, in a market that’s fairly cheerful here is a fertilizer stock widely followed, which is breaking down. So Chambal is a short sell even in a rising market. _PAGEBREAK_ Q: What would you take away from this, is it likely to be a flat kind of day for a Nifty trader? A: The fact remains that for whatever it’s wroth, it is a little higher than yesterday. My takeaway is that we should be looking to go long because we are now about 40-50 points away from a breakout. We don’t know if that will come about. If it does then we are ready, we are in position to take advantage of that. So at this point there is a mildly bullish bias to the day. Q: It is still within that trading range, in that would you classify this as a tentative trade or a low conviction trade trying to feel out if it works out or not within the range? A: I don’t know about low conviction but it’s a tentative certainly because the idea is that it’s quite possible that by the time F&O settlement ends at 3:30 pm, the markets may make a move on the upside. If they do that then it becomes a high conviction trade and we will carry this positions for whatever happens next. If the market slides, if it doesn’t breakout, if it just stays where it is then maybe we will close it. So it is tentative but it is tentative on the upside. Q: Any sense of what the chart of Aban Offshore is telling you? A: Aban Offshore has flattered to deceive so many times. It builds a base and then it falls apart. This time again its building a base and at a much lower level because it keeps on coming down, so maybe this is it. At this point Aban should be considered for a long only idea, not shorting it. But it has to break out to prove that this the final low for the stock. Q: How about something like a Balrampur Chini? A: Mainly because sugar stocks are mildly bullish there is momentum in Balrampur, so Balrampur is classified as a buy but in reality I wouldn’t touch it. It has a horrible chart; it is in a trading range for three months now and doing nothing. So it is really a tribute to sugar where some momentum is on the upside. That is why I am saying Balrampur could be bought into but why would anyone do that? Q: Your view on United Phosphorous? A: It was considered as a buy yesterday and now it has seen a very decent rally. It is still a buying opportunity. Except that after two back-to-back days of gains you really want some tactical steps to be taken. Wait patiently for consolidation for a minor intraday dip and then go long in it. I think there is more upside. Q: You were talking about REC, what about PFC, are you bullish on it using the same yardstick? A: It is almost the same relatively, RECs charts are slightly better. Otherwise both of them come together, they move in the same synchronised way. But PFCs charts are fairly decent, there is buying opportunities here. My own sense is it should reach Rs 200 sooner or later and then even cross it So REC and PFC both should be in a trader’s portfolio for long only trades and could be a part of positional trade portfolio. Q: Is the rally in Educomp over, or do you think this is just a correction of that sharp upmove? A: I think its over, at least people who bought it must have made some money. It ran into that Rs 170-180 resistance and while anything is possible, I would think it becomes a short selling candidate again. Q: What about something like Reliance Infra? A: Reliance Infra’s charts are bullish. The problem here is that it made that V-shaped rally, it just fell to Rs 415 and then started rallying one fine morning and never stopped. To that extent, when compared Tata power is a more stable chart but that wouldn't deter me from saying that Reliance Infra is bullish and you should be looking to buy it. My own sense is that it will be choppy for many days as it digests the big gains it has already taken.