Don't trade Nifty before RBI policy: Sudarshan Sukhani

The Reserve Bank of India will announce its mid-quarter monetary policy review today. In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.com says the Nifty will breakout either up or down, but the intraday directional move will only be clear after the announcement of credit policy at 11 am in the morning.

He says the market is trading in a 70-point narrow range of 5,850 on the downside and 5,920 on the upside. He advises traders not to rush and trade the Nifty before 11 am, which will be a game changer for the market direction. Below is the edited script of his interview on CNBC-TV18 Q: A word on the Nifty and whether you see any breakout from this trading range it has gotten into? A: The market will give us breakouts but it is nice to know that we have well defined levels in the trading range. The levels are 5,850 on the downside and the narrow range, which will give us the first immediate trend, is 5,920 on the upside. So it is a narrow range of 70 points. We all know it won’t last but sometimes the time it takes to breakout is longer than we can imagine. We have been short intraday for two days now and both trades worked in small points or more. Today, we should be long that’s the bias for the day but it is only an intraday trade. The game changer will be at 11 a.m, when the credit policy is announced. Therefore there is no rush to go and trade the Nifty, wait for that 11 am and take an intraday directional view after that. These two levels, which I have defined, will tell us whether the market is going up or going down. Q: The autos did quite well yesterday; you think Tata Motors (DVR) could go up? A: Yes Tata Motors DVR is making a continuation head and shoulder pattern and moving on the upside. This pattern is made infrequently and it tells us that the trend is intact. A consolidation is giving way to a breakout on the upside. This is happening to Tata Motors as well but the DVR is always a preferred instrument. It is priced a little less and sometimes relatively gives more beta as compared to the original stock. So Tata Motors DVR is a buy for the day. It is very difficult to say how the markets will behave after 11 a.m. but if they behave well, traders should be looking to go long in this. A positional trader could go long otherwise also. Q: Mahindra and Mahindra (M&M) continues to be a favourite? A: It is, it is in a trading range and it has been a favourite. It is on the verge of a breakout to new highs and that will be life time new highs. It has done that yesterday but the follow through should come today, and probably we will see a significant move. Earlier I had suggested that we should see Mahindra & Mahindra (M&M) cross Rs 1000, this time perhaps it will do so. Q: There has been quite a bit of strength in the metals, you are buying Steel Authority of India (SAIL) today? A: Yes I am buying SAIL today but for a different reason. Strength in metal socks was really for the short-term, so I haven’t been enamoured by the rallies in Hindalco Industries, Sterlite Industries, Sesa Goa but SAIL has done something very different. SAIL has made a fairly bullish basing pattern and has broken out. It tells us that at least for the time being it has gone through a bear market, given us a confirmed reversal pattern and is willing to go higher. Among all the metal stocks SAIL is probably the preferred pick now, not just for the day but also for few days or a couple of weeks. Traders should go long in it; there is probably a significant 10-15 percent upside or even more. Q: United Spirits is on your sell list? A: Yes because it is difficult to believe it went up from Rs 400 to Rs 2000. The stock is falling now, it is difficult to say whether this decline is a flag in an ongoing uptrend or it is the beginning of a down move. I am assuming it is the beginning of at least a deep correction. All rallies correct but United Spirits hasn’t done that and it is giving us the first signs that may be its willing to go for a correction.If we are wrong then traders have to accept that and you get stopped out. If we are right then the correction could be fairly deep here. _PAGEBREAK_ Q: GAIL India is also in your sell list today? A: GAIL India had been in our sell list earlier also. The stock has done nothing; it made a very mild rally and then after a small consolidation started falling down. It is a low beta stock, so it doesn’t fall dramatically. Whether it falls inch by inch or centimetre by centimetre, the trader still makes money over a few days. GAIL is a short sell, it can also be a hedge to any long positions that a trader has. It is an independent sell. If the Nifty were to start cracking, GAIL will literally have a waterfall decline. Q: You are bullish on Sun TV Network, why? A: We have been bullish on Sun TV earlier also. A small correction in Sun TV, which was a very mild correction, has found a strong support. It is now rallying from that support. So it is a strong share in an uptrend, with very small corrections. There is something going on here, which I don’t understand but we must be part of whatever that is going on. Just like when Jet Airways was Rs 300, we felt that the charts give us some very large opportunity on the upside. Sun TV is doing that now so people should be long whenever they can. Q: A word on Nifty, 5870 is what the pre-open indicates? A: I had suggested that I have bullish bias today and that is what the pre opening is indicating. The intraday trade is to go long in the Nifty; there are no positional trades here. We don’t have any positions while the Nifty remains in that narrow range. But for the day, some positions on the long side can be taken in the morning. Depending on how the RBI Policy pans out, the positions can either be extinguished or added to. Q: What did you make of yesterday’s move in Adani Ports? A: It is just part of a continuing uptrend; there is more upside here maybe to even Rs 150-160 depending on the momentum. Although the Momentum depends on the Nifty also, I think this is a stock that you would want to buy. After yesterday’s big move, maybe wait patiently for an intraday correction or a one day correction but go long there is more upside here. Q: What about NMDC, have you been tracking that chart for the last few days it seems to be creeping up continuously? A: It does suggest that a long-term trend line has broken on the upside, which means the bear market that we were seeing in NMDC is probably coming to an end. The process of a bear market ending and a new bull market beginning can be very tedious. It doesn’t have to be a V-shaped rally but the first signs are we should be looking to buy this stock every time there is an opportunity. There is an opportunity today as well. Q: How much more downside do you see for Bharti Airtel? A: An immediate target on the downside could be Rs 288 but I would assume that somewhere around Rs 280 is a level where the stock should come to. It is no longer a correction; it is almost a virtual downtrend _PAGEBREAK_ Q: What about Voltas, would you buy that? A: After yesterday’s rally I would buy Voltas. The trend in Voltas is still uncertain but the fact is that it is repeatedly finding support at Rs 100. As long as that support holds and there is momentum on the upside, the stock should be bought into. Q: Is Shree Renuka Sugars chart disappointing? A: The chart of Shree Renuka is very disappointing. Firstly, there is no clarity on what it is doing; a sharp rally finally led way to resistance and then told us this is just a bear market rally. Now the position is very clear that there is nothing to buy in Shree Rneuka. It is not easy to go and short sell this stock at such low prices. The trade is still on the short side if at all.  Q: Your view on NHPC? A: NHPC has rallied from Rs 17 to Rs 23, which is almost 30 percent rally. So we have seen a 35 percent rally in this stock but did not realise it. Now the charts are telling us this rally is probably the beginning of a bigger move towards Rs 28 eventually and a little more modest target for the short-term traders. The trade is to go long, it is worthwhile. Disclosure: I have no holdings in the stocks discussed.