Nifty heading lower; intraday traders may short: Sukhani

Sudarshan Sukhani of s2analytics.com, in an interview to CNBC-TV18, shared his outlook on the market and various stocks. 

Below is the edited transcript of his interview to CNBC-TV18. Q: Is there a trade on the Nifty now? Will that be a bear trade? A: There is a trade on the Nifty. It is a trade that intraday traders can take on the short side and then see whether that decline continues. I just have to recall how we have been tracking the Nifty and the Bank Nifty. We suggested that there is no trade in the Nifty prior to the Ben Bernanke gap and there was a long trade in the Bank Nifty. Once we got the gap, we said take your profits and get out; that seems to be working out very well. The Nifty is giving us an initial sign that it may be willing to go lower. If it is not, we will simply get out of that trade, nothing is lost. We have done rather well over the last couple of months catching all the swings, but the sense is that a temporary top or may be even a long-term top has been made at 6,170 two days ago and probably the markets are now looking for lower levels. Q: Since you do have lower levels on your mind, will something like Reliance Industries lead it? Is that why you are selling it this morning? A: Yes. It seems so. Once we talk about a trade in the Nifty, then we are really talking about a trade in some of the heavyweights whether it is long or short. When I say there is no trade in the Nifty, then usually most of the heavyweights also don't have a trade. Reliance is now facing strong resistance in the Rs 880-900 area that is where a rally has taken it. That resistance should eventually translate into lower levels. At this point, it is too early to say whether it can definitely go down. The signs are that the rally is not going to continue; so we are short in Reliance. We will start these with intraday trades. If the intraday trades work well, all of them should be carried forward as that really means that the markets are willing to give some leeway on the downside. Q: What are your levels for Ultratech Cement? A: Ultratech Cement has done very well. It was also an outperformer whenever we discussed cement stocks. That outperformance will continue. Some stocks will go against their market trend. There is no rush to buy Ultratech Cement on Monday. If the markets open lower, as they seem to. then even Ultratech will have a dip or correction of some kind. It is worth buying into a correction, it is not a day trading opportunity as it is not a volatile stock that lends itself to big swings, but you want to enter on a dip day like Monday and then hold on for a few days. Q: On the Bank Nifty, would the strategy mirror the Nifty strategy? A: It would, except that the reason why we were focusing on a long position on the Bank Nifty was that the gains were expected to be more. The index went up 6 percent; same thing is happening on the downside. I haven't discussed the Bank Nifty specifically because there was a very big decline on Friday. Perhaps, it needs to consolidate. But yes, there is a trade on the short side. It is not immediate which means that while it is quite possible to go short in the Nifty after the initial cooling off, for the Bank Nifty, we need more patterns before we begin a short position. Individual components in the Bank Nifty lend themselves to selling. Some of the private banks still are not very clear which is why the bank Nifty can be avoided as a short sell for the day. Q: You have a sell on Zee Entertainment today? A: Yes Zee has been a big disappointment now. It completed its bull market, made a distribution and then it has been consistently coming down. It is a classic case. It had an accumulation, a big run-up, a distribution that took its own time and then a rundown where it is now; a markdown phase. It is going to see lower levels. Zee is not necessarily a day trade because the chances are it is going to go lower. So traders who are willing to carry positions should do that. Q: You have a buy on Sun Pharma? A: Yes because Sun Pharma is a dream stock; every time we say the bull run is over, it comes back from the wilderness and starts going up. It is an evergreen stock. I would be a buyer in Sun Pharma, as an intraday trade, you use a dip to buy. If this works, if you see strength by the time markets close in Sun Pharma, then you can also carry that trade. But, there is a trade here on the long side. We should not even think of going short in pharma and Sun Pharma. Q: You have picked Oriental Bank of Commerce (OBC) for shorting, but is it just a proxy for many other PSU banks? A: Absolutely right. It is just a proxy that we could only discuss one of them. I am a little wary of selling the Bank Nifty now because the private sector banks although they fell, haven't given us the sense of imminent collapse that PSU banks have. Just one bad day and they are all telling us that the rallies were bear market rallies. You should have taken profits and now look on the downside again. So, PSU banks almost all of them are selling opportunities. We selected OBC because it was probably the weakest of the PSU banks. Disclosure: No personal interest in stocks discussed. Q: We have opened up at this 5967 level on the Nifty. What should the strategy be for the day? A: I would have a bearish bias and there is no rush to go and short just now. We wait patiently for the first 15-20 minutes and then if the market starts taking out the lows of that period, then even after a 1 percent cut, short trade is probably justified. If the markets don't take out the lows, if they remain choppy, then we just wait. Q: Is there any other bank trade especially among the Nifty stocks? A: No. I would prefer to stay with PSU banks in the midcap category. I am not very keen to go short in the Bank Nifty. PSU banks like Canara Bank, Punjab National Bank, Bank of Baroda are short selling opportunities. Just have a little bit of patience, not sell. Let them consolidate; they should go lower. Q: Any of the IT stocks would you buy? Any long calls over there? A: No. I don't think today is a good day to buy most IT stocks. Some pharma stocks should do well that is the only area where we could go long. Q: What are the levels to watch on a name like HDFC and State Bank of India (SBI) that has now dipped below Rs 1700? A: I don't think we have any levels to discuss for HDFC and SBI because we are opening with a gap down. The levels have become immaterial; much easier to say what the strategy should be. You want to wait for this market to spend at least one hour and after that if the market starts showing upside momentum and crosses the highs; that is the sign that the short trades are not working.