Nifty faces strong resistance at 5650: Sudarshan Sukhani

The Indian market has been very volatile over the last many days. In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.com says this week will be choppy. "The Nifty faces resistance at 5,650," he adds.

According to him, the F&O expiry could be anywhere in between 5,550-5,600. Also read: Growth in India to recover to 6.1% in 2013, says Morgan Stanley Below is the edited transcript of his interview with CNBC-TV18's Mitali Mukherjee and Reema Tendulkar. Q: Truncated week, expiry week, how do you approach the Nifty today? A: I think we can add the words choppy week also. We are likely to see both upswings and downswings in the Nifty. Today, in the international market, we have a mix picture. Asian cues are weak. That means we would probably see an up day, little rallies. But this faces significant resistance in 5,650 area. That is a strong resistance zone, which is unlikely to be crossed. So, any rally should stall there and then we should come back to the lower ends of the trading range, 5,550-5,560. Where will the expiry go? That is anybody’s guess. It could be anywhere in between this trading range. Q: Most of your picks or trading strategies are in the midcap side, the only one in the Nifty is Bharat Petroleum Corporation Ltd (BPCL) and you have a sell rating there? A: Yes. BPCL’s charts are very dismal. It went through an uptrend or a bull market and then after a distribution, it is now coming down steadily. So, it is not just a correction but a downtrend, which means a mini bear market of its own. The charts tell us that there is shorter selling here. In a choppy market, there are options for selling as well as for buying. BPCL is clearly for selling. Q: You have a sell on Jubilant Foodworks as well? A: Yes, Jubilant Foodworks is a very interesting chart. It has rallied and confounded all sorts of analysts including me, by reaching Rs 1,400 but for the last two months, it is in a trading range. While it gives the impression of rallies, it is moving in a 150 point range all the time. It goes up and then comes down to the lower end again. This time it has broken down from the lower end, which means that the trading range we were seeing was a distribution. Jubilant Foodworks has broken down from that distribution, suggesting if not anything, a deep correction lies ahead. This is a trade which has some risk, it is a momentum stock. If we understand that risk then it is worthwhile taking a short position here. It is not just day trading, if it works then it can give a long decent profit on the downside. Q: Bajaj Finance is a buy for you this morning? A: Bajaj Finance is an excellent stock. That entire Bajaj Group is doing remarkably well. What they are doing with their companies, I do not know but the market loves them. Bajaj Finance had a rally, a small correction then that correction took the shape of a flag. A flag comes midway in an uptrend that means there is significantly more upside. We are only talking about a day trade today. If the day trade works out today or tomorrow, it is worthwhile carrying this position for as long as it takes. So it is also a position trade. _PAGEBREAK_ Q: We have been talking about the strength in autos but you have picked an auto ancillary stock, you are buying Motherson Sumi? A: I think Motherson Sumi is probably a smallcap stock. It has been a favourite earlier but like most other smallcap stocks, it had a very sharp correction and a bear market of its own. Now, it is building a base and coming out of a long base. Bases are good, and when you have a long base and a breakout that tells us that a new sustained bull market is probably beginning. Motherson Sumi is not a day trade. I have put it in just to tell traders, this is a stock you should be doing swing trading in, every time it dips and every time you find an opportunity of small breakouts. For people who are looking for investing for a six months horizon, it is a very good stock to be in. Q: Adani Enterprises as well is a buy for you this morning? A: It is and luckily it is also in the Futures and Options segment, so there are many opportunities of trading intraday also. This is a stock that has done its bear market, completed it, has built a small base and now it is coming out of it. When you are coming out of a base, it is very choppy conditions because people do not have full belief in it. It sometimes comes down, retreats but eventually it finds support at higher levels. It is making the higher highs, higher lows pattern and moving ahead. It is a stock that we want to buy at every opportunity we get. Q: What about something like an Arvind? A: Arvind is a disappointment. It has a correction then a rally but that rally did not lead to a new rally; it did not lead to new highs. It eventually led to a distribution and that distribution has broken down again. So we are seeing a very mix pattern on charts. There are some stocks that are suggesting that significant upside lies ahead, like Adani or Motherson Sumi and there are some stocks like Jubilant and Arvind, which have given clear breakdown signals. So perhaps this market is going to give opportunities on both sides. Arvind is a short sell not just for today, but probably one could buy Puts for December and carry it on. Q: What kind of trade would be prudent this morning, for the Nifty first? A: The charts suggest some kind of an uptrend is coming. It is not easy to say what the levels would be. The targets are fairly ambitious, another 80 points from current levels. I don’t know whether we will do that but the view is that because a breakout seems imminent, we should be on the long side. If it doesn’t workout by today afternoon, we can close those positions. There is no need to carry it forward if the trade is not making money. We are doing it on a day to day basis now because tomorrow could be very different, so for today, I have a mildly bullish view. Q: What is the chart of Punjab National Bank (PNB) telling you now? A: PNB charts are dismal. There is nothing in it. The small rallies, which have seen are relief rallies. The charts are suggesting that either a base building exercise will begin, which will tak its own time so it is not a buy or the decline continues in which case we stay away anyway. _PAGEBREAK_ Q: How about something like a Shasun Pharma from the midcap pharma bunch? A: The charts are attractive. It made a cup and handle pattern and then broken out from that. Shasun is a midcap or a small cap stock, so I think some fundamentals need to be added to the charts but I am not able to do that. So if everything is well, then the charts are very conducive to a significant rally. Q: Have you had a look at the charts of Manappuram General Finance lately? A: Yes, it has repeatedly been in my buy list. I think for the last 10 days, I have been saying that the decline is over, please go and buy it. I think a lot of people bought it. That big decline from Rs 39 to Rs 31 is done with. It was a sharp correction and that is inevitable because it rallied from Rs 20 to Rs 40. So you also see these corrections, that’s over. Now, the charts of Manappuram are very attractive. Every dip, every breakout is a buying opportunity. Q: How is the chart of Jet Airways above this Rs 500 price looking now? A: It is looking just as it looked, when I was recommending it at Rs 300. It is not a buy anymore, which means for day traders, for swing traders, this rally of 100 points tells us that we must wait for the stock to pause and to correct. That inevitably happens no matter what the stock is. So, theoretically the trend is up, we want to go and buy it but this is not a good location for buying. You have to wait now. Q: What about something like an HCL Technologies which is been moving well? A: It has been doing very well. Again, it was in my buy list on Friday, I think there is much more momentum in it. This stock has been inching upwards, little by little but it is moving up and that’s the sign of a very strong uptrend. Q: What about Tata Global Beverage technically? A: Technically, it is in very fine shape. Tata Global had this strong rally and then a small reasonable correction. Stocks that correct, tell us that traders are letting off steam and buying is coming at lower level that is why the correction stops. For Tata Global, the correction has stopped. For three days it was in a narrow range and it just is on the verge of breaking on the upside now. So, today is a very good day to go ahead and buy it.