Mkt basing for correction, Sell GMR & Cipla, says Sukhani

Sudarshan Sukhani of s2analytics.com says that a short-term downtrend in Nifty and Bank Nifty has started.

“The Nifty and the Bank Nifty are now showing signs of a technical distribution pattern that is just breaking down. The fact that we have rallied 1,600 points from the 4,500 lows is also adding to the sense that a deep correction is coming,” he said in an interview to CNBC-TV18.  Below is the verbatim transcript Q: On the medium-term are you beginning to get a feeling that the market is breaking down? A: Yes. We have already started seeing a short-term downtrend, not just in the Nifty; it is also in the Bank Nifty, in most midcap stocks. Therefore, the trend builds up; it does not come immediately or instantaneously. The build-up is now on the short side. The market is basing for a much deeper correction. Nifty may slide to 5600; see pressure on gold: Sushil Kedia What are the signs? The signs are that the Nifty and the Bank Nifty both are now showing signs of a technical distribution pattern that is just breaking down. The fact that we have rallied 1,600 points from the 4,500 lows is also adding to the sense that a deep correction is coming. A distribution pattern, which comes at the top of a rally, is likely to see a deep downtrend and not just a small minor correction. Any decline is going to be interrupted by rallies. That goes without saying. However, the broad outlook slowly is changing for much lower than what we think we will go. Q: GMR Infrastructure is on your sell list today? A: GMR's charts are horrible. It is not easy to say that because at Rs 17.5 it cannot get worse. However, the charts suggest that an eventual target of Rs 13.5-14 is possible for this stock. It is going to go back to places where it has not been. So, GMR is a short sell. Today also in a choppy market we are now looking at are positional shorts, stocks that are likely to come down much more. So, any weakness in the market should be used to sell them. GMR qualifies in that account. Q: What about Indiabulls Real Estate? A: That is a pity. It has been a favourite for me. The real estate stocks are now cracking down. DLF is the only one left. First, Housing Development and Infrastructure (HDIL) and now Indiabulls Real Estate; same pattern, big rally, large distribution pattern and that distribution is now breaking down. It has also become a positional short, which means if we see a rally here we do not buy it, we sell it. Today if the Nifty shows any signs of weakness, real estate may be hammered badly and unfortunately this one will be part of it. Midcaps to gain interest, Sensex seen at 23000: Ambit Cap Disclosure: I have no holdings in the stocks discussed. _PAGEBREAK_ Q: You are also selling Cipla, a defensive sector name? A: That is the big surprise. It is a surprise for me also. Cipla's sense should have been that we are going to see a correction and a renewed uptrend. On the other hand the correction has taken the shape of a bearish distribution, a bearish head and shoulder and it is breaking down. If defensives are breaking down then what is left in the market? That is a big question mark. Cipla is now a short sell. Sell it for intraday, for positional purposes, for a swing trade and if it rallies, look to go short again. Buy puts, do anything else. It is no longer a buy and it is a worry also. Q: You are playing a long on ACC today? A: I have been upbeat on cement. It does seem bottoming out. Bottoming out is a process that takes time especially in a market that is falling but we had Grasim Industries, which was doing relatively well. ACC seems to be suggesting that it made forays into lows for two days and bounced from those lows. That may be a possibility that perhaps it will see a decent tradable bounce on the upside. In any case it is taking a chance, worth taking a trade on the long side. Cement is not a short sell.   Q: You have picked Havells India from the midcap basket on the long side today? A: Havells has been chosen many times earlier on the long side and in all fairness it has proved itself, it is now on the verge of making new highs. At Rs 695 it suggests that it is willing to go in an unchartered territory. The midcaps that are making new highs are so attractive that we cannot miss it out and it is rewarding buyers who are going into it. So, Havells for today and as well as positional trade is worth looking at. Q: You are bullish on Mahindra and Mahindra (M&M)? A: Yes, I am bullish on M&M and it is matter of chance whether it goes up or not. I think M&M is not going to do something different from the Nifty. It is likely to outperform. Therefore, if the Nifty stays steady the chances are that M&M will give us an intraday trade on the long side. So, this is not a big commitment to go long on a positional basis. However, certainly for a short-term trader M&M deserves attention if the Nifty is stable; consider autos and M&M is one of the better buys today. Q: It looks like there is more pressure on the index than the SGX suggesting? A: Yes, it is possible because the trend is down so the easy way out would be to follow the trend and most markets will do that. The idea then for the short-term trader is to stay with short positions and try to sell on rallies. I do not think a morning break on the downside is sellable. We have to wait for intraday rallies to sell. However, the trade is clear; there is no purpose in buying. We have to go short.  _PAGEBREAK_ Q: Has the time come or have you seen enough to add positions or add quantities to your positional short or would a breach below any particular level convince you that this is not a 100 point trade that you are playing for? A: I am convinced that I should add to my positional shorts. The only question is where and that would be on rallies. I think the rallies will also come. There will be hope, people will live on hope but I am fairly convinced that the market is now heading lower and it is not a 100 point decline eventually it should go much lower. Q: You track Pantaloon Retail? A: Pantaloon is one of those disappointing stocks, did all the right things. I thought it is entering an uptrend. It made a bearish pattern, broken down. There is no support. The support comes at Rs 204-205. It becomes a positional short. Q: How do you approach Reliance Capital which has been down 11 percent in the last three days? A: Only as a day trade one should consider buying it. It has fallen 25 percent from Rs 500 to Rs 400 but that is Rs 395-400, it is a strong support zone. So, as a day trade, I might think let me see if I can get a bounce here. Q: Your views on LIC Housing Finance? A: The sudden sharp declines have brought LIC Housing to Rs 250-260 level where strong support comes. This is a day trade. I am not even considering carrying these positions. We cannot trade for a sell here. We have to trade for a bounce or stay away. Q: What about Sobha Developers from real estate? A: Yesterday’s decline got stemmed somewhere in-between. It bounced back from the lows it made yesterday. That is a good sign. The trend is up. So, Sobha is a positional buy but I would buy into the weakness. Q: Your thoughts on State Bank of India (SBI)? A: It is a short sell. It has not come to support levels also otherwise I would have said let us try for a bounce today. Banks are very weak on the charts; the Bank Nifty is likely to lead the decline, for whatever reasons, I cannot explain that. So, SBI remains a short sell. Look for rallies to sell into. Q: How would you trade Coal India? A: I would still sell it. We had a three day rally in Coal India. That is a bear market rally. The pattern of lower highs-lower lows is intact so we are looking to sell into strength, which is the right way to take a short position. So, yesterday’s small rally is probably the end of that upmove and I would be a seller here. Buy Puts, sell Calls, sell Futures.