Rally has more legs, buy on dips; 5800 key level: Sukhani

In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.com shared his reading and outlook on market and specific stocks.

Opening Bell: Will July WPI inflation data dampen mkt mood? Below is the verbatim transcript of Sukhani's interview with CNBC-TV18. Q: We have made our way back to 5,700, what is the approach today? A: We got the market rally when it was beginning. The rally is not over yet. It is a correction in an ongoing downtrend and there is no confusion on that. The corrections can be tradable and this one was. However, even today one should be a buyer on dips so this market can have more legs, especially if one is buying 30-40 points lower then for intraday traders there is more momentum on the upside. The positioning is not on the short side for the day. This rally will end at some point of time but today is not that point of time. Q: What would be the goalpost you would look at? A: We are looking at 5,810-5,820. So, we could be having 100 more points here and if we buy on a correction on a minor dip then there could be 140-150 points of gains possible. So, that is a tradable bounce. At 5,800 there would be strong resistance, if we do reach there. However, something else is going on and that is on the Nifty because the big moves are coming in the rupee. The rupee in spite of all the volatility, we have seen it come down, go up and for the last ten days or rather two weeks the rupee is in a trading range between 60/USD and 61/USD. It is now on the verge of breaking out of that range. So, if the rupee embarks on a journey northward, looking above 61/USD and then going towards 63/USD then the Nifty is not going to attempt 5,800. If the rupee stays stable, the market should make that attempt. Therefore, both of them are related today. Market pullback real, Nifty can touch 5850: Dalton Capital Q: You have a buy call on Motherson Sumi Systems? A: Today could be a choppy day for the Nifty after three days of gains and there are opportunities in midcaps because the short-term trend is up. Motherson Sumi had a big rally and after that it went into a trading range for three months. Now it’s on the verge of breaking out from large trading range. So, there are two trades here. One is for the day; take a trade today, carry it for the day, if it works properly, if it closes well then carry it. It is a cash share, there is no harm in trading in cash shares or one can simply be an intraday buyer. The second trade is to take a position here because the eventual target for this rally is as high as Rs 280 or even Rs 300. Therefore, both trades are possible. Q: Voltas reported disappointing set of numbers; you will sell the stock technically as well? A: Yes, Voltas has been in a downtrend and coming in our sell list, on and off. It has got strong resistance at Rs 80 area. It is unlikely to cross that. It did not yesterday when the market had a good day. Therefore, in a choppy environment Voltas will continue its decline, which means one is selling on a rally. This is a Futures and Option (F&O) stock; it is worth taking a trade on the short side for the day and if it closes mildly weak carry it for Friday.  Disclosure: Sudarshan Sukhani has no holdings in the stocks discussed. _PAGEBREAK_ Q: Siemens looks to go short? A: Siemens has been in our short list repeatedly. The stock had a vertical decline, almost straight line decline and then the rally was so tepid, it is not worth talking about. However, three days of minor upmoves and now again it is beginning a decline, which suggests that this was a small bear flag and significant lower levels are coming. We know what happened to bluechips like Bharat Heavy Electricals (BHEL). Therefore, it is not about the quality of a company. It is about market perception. Siemens is going much lower, today is a good day to short it because it’s on the verge of a breakdown. Q: You like Bata India? A: Yes we like Bata; we have liked it for a long time. Bata is prone to volatile moves, it had a sharp correction and then the rally has started. It has already embarked on a new rally. That rally should have lot of legs and see it go much higher. So, for the day, take Bata as a long trade. In a choppy market we have both short and long trades. Mild bias should be towards long trade and Bata is well positioned to take advantage of any gains and strength in the market. Q: You are long on Petronet LNG. What are your levels? A: Petronet is a stock that we are now buying on dips or rather a deep correction and that correction maybe over. It is breaking out from a small base after a big decline. It’s always the best trade to take. A base breakout after declines suggests that a reversal is coming. Q: You have chosen to sell Ambuja Cements today? A: There is nothing in cement. Ambuja had a straight line, vertical decline on the back of news, the merger or demerger, whatever it was. However, now after a small rally it already started a downtrend. A lot of these stocks went down yesterday when they should not have and Ambuja is one of them. So, the sense is clear. It is going to make new lows in this downtrend; we want to be short here.   Q: What would your strategy be on the Nifty? A: The strategy on the Nifty would be to wait for a dip and buy it. A bullish mild bias and that remains for the day. The rupee is on the verge of a breakout. If that happens then we will see how the Nifty behaves but the view is to be a buyer. Q: If one is a buyer in index and then where should the stop losses be? A: We are looking at a short-term trade and our stop losses should now be at 5,680. If the Nifty moves up, we will tighten it immediately to 5,700. We are not taking any risk. _PAGEBREAK_ Q: If your stop loss is as close as 5,680, you mean you will buy between 5,680-5,700 range? A: We talked about stop loss at current levels, the level where Nifty is expected to open. The stop loss would then depend on where the dip comes to. However, if somebody wants to be a buyer then keep a tight stop at 5,680. Q: How would you trade Tata Steel today?
A: It has been rallying for two days and 10 percent rally in Tata Steel is not a day trading trade anymore. Do not buy it today but the fact that this rally has come about makes us a buyer in Tata Steel. It depends on how it opens. But even an intraday consolidation justifies buying. Q: Your views on Axis Bank since everybody recommending private banks?
A: Bank Nifty is also doing something interesting. It was building a base for some time now, not just for three days. It is now coming out of it. Therefore, I would be a buyer in Axis Bank. We are buying it on dip. It is a day trade and if it works then carry it into an overnight trade. Q: On banks you would choose to carry the trade overnight, what about the Nifty. Would you close your positions by the end of trade whatever the situation or do you think this rally will continue and you could hold it for Friday as well?
A: It is early to say how the market will appear at closing bell but I would close the positions. The Nifty has not given us a similar base building exercise as the banks are doing. Q: Do you like Sintex Industries among the midcaps?
A: I must explain that all the buying that we are talking about today is essentially for the day. Therefore, Sintex is also a buy. For last ten days it was moving in a very narrow range at significant lows but it broke out of that range yesterday, which suggests that momentum is now on the long side and we should be buyers. These are not trades that are recommended as an investment, as a position idea. Q: Escorts has delivered good set of numbers. Technically have you taken a look at it?
A: Escorts is one of the better charts in the midcaps universe. It is on the verge of a new move on the upside. I would be a buyer here. It is not a day trade. It is now the reverse of what we were discussing earlier. It is something one should buy, hold and then wait for few weeks or months to make money. However, I think it should work out. Q: How would you trade DLF?
A: DLF is a buy for the day. They are all mimicking the Nifty and the Bank Nifty. The Nifty itself is in a buying mode but these are short-term trades.