Bank Nifty under pressure; short OBC: Sudarshan Sukhani

The market moved downwards after a two-week of gaining string as wary investors opted to book profits after recent gains ahead of the start of corporate earning season amid tail-end weak macroeconomic factors. The BSE benchmark Sensex moved down by over 120 points to end to 19,663.64.

Technical analyst, Sudarshan Sukhani, s2analytics.com says Bank Nifty is showing signs of pressure since both its components, the PSUs and the large private banks are showing weakness. He further adds, OBC has made a double top. It is one of the weaker PSU banks. For short-term traders there is a trade, they can go short.

Stocks in news: Karma Ind, DCHL, Arshiya, Geojit, Alok “The best case scenario is a consolidation, and the worst case is a minor dip,” he asserts Below is the edited transcript of his interview on CNBC-TV18 Q: The Bank Nifty lost more than a percent last week. Are you beginning to see signs of pressure there? A: Yes, I am. What has happened is that the large private sector banks were in any case topping out. Now Public Sector Undertakings (PSUs) which were doing very well and which I am fairly upbeat on are suggesting at least a short correction is in the offing. They are making at least bearish patterns that suggest some kind of a correction. If both the components are individually suggesting a weakness, then the bank index is not going to do its own thing. On component charts, the suggestion is that the best case scenario is a consolidation and in the worst case a minor dip. Q: You are shorting Oriental Bank of Commerce (OBC) today? A: OBC has made a double top. It is one of the weaker PSU banks. It does not mean that all PSU banks have become shorting candidates, but the fact that some of them are now suggesting weakness tells us that it is best to stay away from the sector on the long side. The double top is just on the verge of getting confirmed. It did get confirmed on Friday with a small bar below the neckline, but the chances are that this decline is going to accentuate. Once a broadening pattern is made, once a distribution is made or a consolidation for that matter, then the market gives way at least to some extent. So here the double top will give some movement on the downside. Whether it works for its pattern or not is a different thing. For short-term traders there is a trade, they can go short. Q: You are selling Dabur India today?
A: Dabur had come in our sell list earlier on the back of broad theme that Fast Moving Consumer Goods (FMCG) stocks are now topping out. They are making major distribution patterns on larger timeframes, which means that the distribution is probably for weeks.
Dabur is now breaking down from a trading range. The trading range breakdown at the top of a rally tells us that it is probably going to follow ITC and Lever. Q: Technology was the game on Friday and from that list you have picked the Geometric?
A: Yes, technology was the game and those who did go in Infosys before the results should have been very pleased. The big IT majors have already given signs that they are bottoming out which is why we were upbeat on CNX-IT that is on individual components.
Now the midcap IT sector is giving the same impression, so we should be going into it. It is a sector generic sort of pattern and not just in Geometric. Geometric has made sort of a messy head and shoulder pattern, which is a basing pattern. It has broken out of that. These patterns are primarily reversal patterns, they are telling us that the big downtrend in technology stocks is now getting reversed.
Today, there should be some follow-through in the midcap side because the large cap stocks have already run up, and the patterns tell us that the midcap is now ready to move up. I think traders should focus on the midcap IT sector, which is just beginning to show sings of life. Q: You are also going long on Sintex Industries. It was up about 3 percent on Friday. Do you think it is good for more today?
A: I think it is good for more. Sintex had come in our buy list earlier as well because it is probably building a base. It is a long-term base, which means its bear market is coming to an end. The first signs of life are coming there. A breakout on Friday, that breakout was preceded by a bullish pattern, so I would assume that this breakout will have follow-through. In case of Sintex there is no need to rush into the buying spree in the morning itself.
Day traders should watch patiently. If you get an intraday consolidation or an intraday dip that is a perfect location to go long in it. There is more upside here. Whether the upside comes today, or tomorrow is something we cannot predict but we should be in this stock. Q: Infrastructure stocks have not been doing very well, but you are going long on GMR Infrastructure today?
A: GMR Infrastructure is an interesting call, it has not been my favourite and so it is quite unusual for me to have GMR as a buying opportunity. The charts are changing; the worst it seems is over for infrastructure and that applies to Lanco Infra and to some extent to Suzlon Energy as well.
GMR is having a strong support at Rs 20 and with all the news that it is getting, it is not breaking Rs 20. Every time it retreats it goes to Rs 23-24, comes back to Rs 20 and then finds support there and begins an upmove. That pattern is relatively bullish. These are high-beta stocks and a Rs 2 rally in GMR is easy to get by, but that is 10 percent. For the day trader, for the short-term trader the percentage gains can be quite interesting.
A lot of infrastructure stocks are giving the same impression of finding support levels and it is a buying opportunity. But with infrastructure you have to be very careful. If you sense any weakness then there is no sense in overstaying your welcome, you must get out immediately. Q: Are selling Tata Global Beverage today?
A: Yes, that is a bit of a disappointment. I thought Tata Global would cross Rs 200 before it went into a correction but it has made a pattern of lower highs and is now breaking down from a support level, which means it is giving the same distribution that we have seen in Dabur India, Hindustan Unilever and earlier in ITC.
This is not a reversal of trend in case of Tata Global; I think the uptrend is very strong. This certainly is a deep correction in the offing and therefore short-term traders can take advantage of that pattern and go short here. If you get small money here, exit because it is not a very high-beta, high volatile stock. The pattern is clearly suggests that it is looking at lower levels.
_PAGEBREAK_ Q: Nifty 50 seems to have settled in the green in pre-opening at around 5,970, your view on that?
A: Yes, but that is only one part of the news. The index has gone into a trading range again, for the past nine days it is trading inside a 90-point range. It is very frustrating when the index repeatedly does these forays into a range of 80-90 points and stays there for days. The lower end is 5,940 and the higher end is above 6,030, this is a 90-point range. Inside this range, we are going to get very few trading opportunities.
The trades will come if the index trades below 5,940. It does not have to close but the very fact that it is breaking and cracking that level would be worrying and justify a short position, at least for the swing traders like me and of course anything above 6,030 is a very big long.
There is a very simple trade. Since, I already know that 5,940 is my make or break level, so if the Nifty has some kind of strength in the morning, I will actually go long. I will buy the Nifty because 5,940 in any case is my stop loss, as well as my level for going short. This is a very short-term trade. Short-term traders who are listening will understand what it is but the big trades will come beyond these levels. Q: We have been discussing Jaiprakash Associates. It made a promising move. But would you say that in the last couple of days the price action has been quite disappointing again?
A: Yes, because after the correction it should have gone up but after three days of going up it started another leg of a downtrend which is not what a strong stock should do. But at Rs 93, JP Associates at this point becomes a buy. There is strong support at the Rs 90-93 area, so a short sell is not justified. There should be no trade in JP Associates but if somebody wants to take a trade, then wait for the day and see if this support is holding. Q: We were talking about pressure on the financials. How about Infrastructure Development Finance Company (IDFC) technically?
A: Technically, IDFC is in an uptrend and we try to buy stocks that are in an uptrend, However, this time it is failing because some of the stocks are coming down so much that we will be willing to sell.
As of now IDFC had just one bad day on Friday and so it is not enough to justify a turn of trend. So the trade is still to buy it. However, I would not actually go and venture a buy today. We need either some more dip or support at the current prices but the trade should be to go long in it sooner or later. Q: How much more do you see Hindustan Unilever (HUL) going from here?
A: Rs 470-480, which is the first stop. HUL is probably going to bottom out around Rs 450. So there is a tradable downside even after Friday’s big decline. An eventual target of Rs 450 appears reasonable and immediate target of Rs 475-480. So there is money on the downside here. At some point, traders will say it is enough, but that point is still a little away. Q: How about Mahindra Satyam?
A: It is a wonderful chart for the buyers. It is now at Rs 116. It is breaking out of a very significant resistance level. If it does that, then it is going into completely uncharted territory. Prior to reaching Rs 115-116 Mahindra Satyam had done some very nice things on the charts. It is a matter of regret that I do not track it because I have seen Satyam do so many other things in earlier incarnation. But the charts are very good and it justifies buying at current levels for a position trader. Disclosure: I have no holdings in the stocks discussed.