Momentum favouring bulls: Nifty may head to 6350: Sukhani

Benchmarks Sensex and Nifty witnessed a stellar rally yesterday before closing with over 1 percent gains each, supported by the twin reliefs -- inflation falling to three-year low of 7.1 percent in December and GAAR getting deferred to April 2016.

In an interview to CNBC-TV, technical analyst, Sudarshan Sukhani, s2analytics.com says yesterday the market rallied because it was standing at support but today the market is standing at resistance and if it is able to cross that decisively then Nifty may head higher. “If we have follow-through of yesterday’s gains today an tomorrow, then we have crossed a very big barrier and the Nifty is heading towards 6350,” he asserts.
BSE Sensex to rise to 21,700 by year end: Nomura He further says, as of now, the momentum seems to be favouring the bulls, so we maintain a mild bullish bias. Below is the edited transcript of his interview on CNBC-TV18 Q: Surprise rally for the market by the end of it. How are you approaching the index first and have you changed the targets as a short-term trader? A: It was a surprise rally, but yesterday morning we had said go long because we were standing at support and that support was held. This is the way trading is done. Today is a different story because we are standing at resistance. If this resistance is crossed decisively which means if we have follow-through on yesterday’s gains today and tomorrow then we have crossed a very big barrier and the Nifty is heading towards 6350, the earlier all-time highs. That is a good 300 points from here. There is an ‘if’ because the markets will tell us whether it is heading there or not, but traders should assume that the breakouts are imminent, they will take place, if they don’t we are back to the trading range. As of now, the momentum seems to be favouring the bulls; all we have to do is to see if we get a confirmation. So there is a mild bullish bias which is maintained. Q: We were talking about pressure on the banks, but this morning you are buying Punjab National Bank (PNB), is it a long trade there? A: Yes, PNB is a long trade. Yesterday a lot of things changed. Second, the Public Sector Undertakings (PSU) banks themselves are divided in two parts. For example, Oriental Bank of Commerce (OBC) which we were selling and then there are banks like PNB, Bank of Baroda, Canara Bank which we want to buy on dips. PNB had a sharp rally and then it had a three day correction. In an ongoing uptrend three days is the maximum we get for a correction. So yesterday that correction apparently had ended. It is a small flag also. We should be expecting upmoves here. We also have to think about context. Yesterday, the context was favouring the bulls. We were standing at support. If we are to go up from there everything is going up and we have small risk and large rewards. Today, the context is not as favourable as yesterday. So, short-term traders must remember this and they should take these trades on the long side once they see the Nifty is cheerful. Q: Oil and gas has had the mantle of leadership these last few days. You would buy Hindustan Petroleum Corporation (HPCL) now? A: HPCL had that big base, then a breakout from that base and a correction that absolutely stopped at Rs 320, which is now coming a strong support. So there seems to be some sense in buying support. Out of the different picks that we are looking at today, HPCL is probably the most random, because Oil Marketing Companies (OMCs) always behave differently, they do not always become chart sensitive. However, HPCL seems to be a buying opportunity now because it had a pullback, then a correction which stopped at support, so we go long. Q: Would you say the same of Gas Authority of India Limited (GAIL) from that space? A: Yes. GAIL has a much better chart. GAIL literally had a bear market and that bear market ended. There was a bottoming out pattern and that pattern has given us a breakout. Now, the breakouts are going up, the prices are going up. So now we have a breakout, a pullback and GAIL is now again ready for a new upmove. The charts are much cleaner than HPCL, so GAIL is certainly a preferred stock. I think once a stock completes its bear market and turns around, it does not stop quickly, it has a lot of potential on the upside. Q: Colgate is on your sell list today? A: Yes, we were upbeat on Colgate right from Rs 700 onwards; even few days ago it was a buy. I thought the correction would end as earlier corrections had but this time it did not. After a two day rally, Colgate has come back, broken the earlier lows and is now giving the impression that maybe it is ripe for a deeper decline. We have a call that the entire Fast Moving Consumer Goods (FMCGs) sector is now probably topping out, so that maybe starting for Colgate. It is a late arrival in that topping out group but I think that is probably going on. For short-term traders it is a very attractive selling opportunity and since Colgate does its own thing, even if the Nifty goes up this one could keep coming down. Q: Do you see the pressure continuing on faces like Ultratech Cement as well? A: Yes. Cement is not in an uptrend currently but it is in a correction and it is not going to go with the Nifty. Ultratech is on the verge of a breakdown from a very strong support level. It did that yesterday of all the days, when the whole market was roaring. For most cement companies the deep correction will play itself out and there is no sense in buying the dips. For short-term traders, the potential for a much lower level is strong. So not only Ultratech but even Ambuja Cements and ACC are sells. Today it seems that Ultratech could lead the way on the downside. _PAGEBREAK_ Q Could you give a word on DLF, the big star from yesterday? A: I am not very upbeat on it. We did see a big rally but I am assuming that the other real estate stocks are much better. So, I would stay away. On the charts it is a buy, but I would not go for it. Q: What about Syndicate Bank? A: It is the same group of PSU banks which are doing very well. An immediate target could be Rs 153-154 and also probably higher. The charts for PNB, Syndicate Bank and Canara Bank are all very good. It is important to keep the context in mind that is they will go up once the Nifty decides to go up. Q: What is your view on IVRCL? A: It appears that just like GMR Infra and Lanco Infratech are now building a basing pattern, IVRCL is also doing that, so there is a buying opportunity. It is not just yesterday’s gains; the chances are that an immediate rally to Rs 47 is possible. Infrastructure is doing the right things on the charts. It is going to take a lot of time, but the bias should be towards buying it. Q: Any thoughts on HCL Technologies, the big IT mover from yesterday? A: IT keeps going up, I think this is the last leg of IT’s uptrend. Wherever it stops, it will stop there. All the big moves have already come and they are now behind us. The same applies to HCL Tech. Maybe it will go to Rs 690-700. However we are now on the verge of seeing exhaustion patterns come in on all the major ITs. Q: Maruti Suzuki India had a bit of an off-day yesterday. What do you make of that chart? A: It is on an upbeat. Maruti’s eventual target should be Rs 2,000 plus and if I were to choose between auto and IT now, I would choose auto. We were very upbeat on IT a month ago but that story is now getting over. It is fine if yesterday Maruti had an off-day, these things happen. Maybe a target of Rs 1,600, if you buy on a dip, still the chances are that you will make money in Maruti, it is a very nice chart.