Mkt may slide or remain in trading range: Sukhani

The Sensex yesterday closed at 19,923, down 102 points, and the Nifty shed 35 points to close at 6,019. The decline in the Nifty and Sensex was much lower compared to the over 2 percent fall in both the BSE Small and Midcap indices.

Technical analyst, Sudarshan Sukhani, s2analytics.com told CNBC-TV18 that there is no view as such on the market today. Either we may get a follow-through on the downside and begin a deep correction or we stay where we are at present that is a trading range. Budget will be responsible; not eyeing PM chair: Chidambaram Short-term traders must note that market is certainly under pressure and there might be a follow-through on the downside, he explains. If there is follow through on downside then one can take additional positions by buying Puts and initiating short on Futures. However, in case the market does not see a follow-through then we remain in a trading range there would be no buying, neither additional selling, he asserts. Below is the edited transcript of his interview on CNBC-TV18 Q: What kind of shorting activity are you witnessing in the markets? How would you approach the Nifty today? A: There is a mild bias on the short side, but the keyword here is mild. Yesterday, there was a suggestion to buy Puts assuming that the Nifty could actually slide more. There are two important points which short-term traders must note. First, yesterday was the big day of decline thanks to a lot of midcaps. While the index did not, the sense was that the market is certainly under pressure. That must see follow-through. Every action must be followed by something more on the same side. So, today if we see follow-through on the downside then clearly the market is cracking, and we are willing to take additional positions by buying Puts, then initiating short on Futures. However, if the follow-through does not come then we are where we are, we are in a trading range. There is no buying here, but there would be no additional selling as well. This is important for traders to understand. There is no view. We are in a trading range. Either we get a follow-through on the downside and we crack and we begin a deeper correction or we stay where we are. Q: You are shorting Karnataka Bank today? A: Karnataka Bank had a very silly rally from Rs 110-190 and then it literally collapsed over 4-5 days. It built a trading range, built a very bearish pattern and has now broken down from it. A lot of these banks which saw spectacular rallies will see corrections which will be almost 100 percent. They are likely to come back to where they started from. Karnataka Bank probably leads that list. There was a big decline yesterday, a breakdown and today we should see follow-through. If the Nifty bottoms out this stock is likely to see lower and lower levels till then. Q: Are you selling Tata Steel? A: Tata Steel has been moving down from Rs 440. It has come down to Rs 407 and here it made a consolidation. That consolidation could have been simply a sign that the decline has ended and it is willing to go higher, but it did not. It actually broke down. Stocks that make consolidation patterns should be going up, but those stocks that turn around and breakdown are giving a message that there is more weakness here. In any case this market is now going towards very high quality. We saw how Hindustan Unilever (HUL) suddenly stopped falling and that is what is going to happen. Tata Steel does not qualify as the very high quality stock. It is probably looking lower. Just see the context. I think there is more downside here. It is worth taking a short position. Q: Is Power Finance Corporation (PFC) looking weak? A: PFC is looking weak. There was a strong rally and we also rode that rally. That rally ended in a consolidation. The idea should have been to breakout but it has broken down again. When stocks breakout from consolidation patterns after a big run, tells us that a deep correction is coming. This correction is probably tradable on the short side. There is a theme that seems to be developing, that the midcaps are prone to more shorting opportunities which is what is happening except for Tata Steel.
Q: You have a buy call on Larsen and Toubro (L&T) after the run it had yesterday. A: The best quality is what people are looking at and charts are suggesting that there is more upside here. Yesterday L&T broke out from that bottoming out pattern and that is good news because unlike Tata Steel, which actually came down L&T looked like would cross those resistance levels and go higher. That should be the beginning of a new upmove in L&T. Today the chances are that even in a choppy market there would be follow-through. Wait patiently, and then if you see market steadying, L&T would probably be one of the most preferred buys. Q: From pharmaceuticals do you like Dr Reddys Laboratories? A: Dr Reddy’s is now on the verge of making lifetime new highs. It has been doing that. It has been a relatively laid back stock, but it is going up. For 2-3 days it has been in a narrow range. Yesterday, it just inched up crossing that resistance level and moving towards new highs. That seems to be the sign that a big upmove is coming. So, Dr Reddys is not just a day trade. I would think that traders who are willing should take a position and carry it over to next week. _PAGEBREAK_ Q: Do you see more follow-through on Tata Consultancy Services (TCS) on the upside? A: Yes. These 5-10 top quality names are bucking the trend, while the whole market is collapsing and everything has gone down. For example SREI Infra went down from Rs 50-34, the exact point from where it started its rally. TCS has found very strong support at Rs 1,300. I think this support will hold and traders should focus on long positions only, on these quality names. Everything else should either be forgotten or short sold. Q: How do you approach Reliance Communications? A: Reliance Communications is a buying opportunity. That big decline in Reliance has brought it to some kind of a support level. The support is a little lower, but the reward on buying at current levels probably far outweighs the risk. So in a market that does not go down I would say Reliance Communications is a buy and higher levels can be expected. Q: What does the chart of Andhra Bank looking like? A: It is very disappointing. Yesterday that enormous decline in Andhra Bank told us that it is moving down. It is not news anymore and it is not a buying opportunity. It is not easy to short it after that fall, but please do not buy; it is far away from support. Q: How would you approach Hexaware Technologies after that steep fall yesterday? A: Just avoid it. It is not easy to short stocks which have fallen 15-20 percent. Hexaware, has been a major disappointment. It made a bullish pattern. It broke out of that pattern and then it turned around suddenly and viciously to fall like this. I do not know whether you can actually sell it, go short in it but I am quite sure you cannot buy it. Q: Jain Irrigation looked shaky yesterday, what is your view on that? A: It is another one of those disappointments. Jain Irrigation has been going through a very handsome rally. Corrections are normal in a market. We sometimes think we will step aside when a stock is correcting, but yesterday’s decline in Jain Irrigation was not a sign of a normal correction. It fell 8-10 percent, which is not normal, this is abnormal. You have to sell it. If we find a rally, we will assume that there is a reason why this decline has occurred. So on a rally Jain Irrigation is a sell. In any case it is not a buy. All these stocks that reacted badly yesterday must be avoided till further proof of stability comes. Q: Where do you see as supports on Jaiprakash Associates? A: There are no supports on JP Associates. It is another one of those major disappointments. The last support of Rs 85 has been broken and taken out. Disclosure: I have no holdings in the stocks discussed.