Mkt giving conflicting signals; stay out for now: Jai Bala

In an interview to CNBC-TV18, Jai Bala, cashthechaos.com advises market participants to stay away from market as it is giving "conflicting signals". 

"The Nifty is not showing any signs of exhaustion at this point in time although it is quite long in the tooth; one would expect some sign of exhaustion to appear. Even the breadth is pretty decent at this point in time," he added. Below is the verbatim transcript of his interview on CNBC-TV18 Q: Have you been surprised by this move to 6,000 and how would you look at the Nifty now from hereon? A: At this point, there are conflicting signals that are coming from the market. Unfortunately, I am not able to take a definitive stand. There are multiple possibilities at this point. When I said conflicting signals, the BSE realty index is saying that it is going to drop to 1,600 odd but there is tremendous strength in the Bank Nifty. So, these two are throwing the conflicting signals. The Nifty is not showing any signs of exhaustion at this point in time although it is quite long in the tooth; one would expect some sign of exhaustion to appear. Even the breadth is pretty decent at this point in time. So, it is better to standout at this point in time and wait for the market to resolve one way or the other and then take action on this market at this point in time. It could head to somewhere like 6,100 or even 6,300 but that is not my base case scenario. I am not that bullish but I am just standing aside at this point in time and letting the market tell me which way it is headed. Q: The 9-10 percent moves that we have seen in the last 10 days, have some of your bearish chart patterns got negated? A: I won’t say they have got negated but I have been moving down my trailing stop losses. We were sitting at about 17 to 20 percent profits on Larsen and Turbo (L&T), State Bank of India, Axis Bank and Tata Motors. Those trailing stop loss have been triggered. That is telling them a message that the market isn’t moving as per the bearish expectations, so that is giving us a warning signs to be careful about what the market is doing. It is never a good point to argue with the market whatever be the reasons but you just understand the price and accept it and move on. At the moment it could be false breakout on the higher side too, that is also a possibility but we need the market to tell us. Maybe Reserve Bank of India has been surprising negatively for the last two policy meets. If it does it again this time, we will put on short positions once again and will treat the breach of 5985 as a false breakout. We will once again start going negative on the market on a bigger basis because false breakouts have a tendency to reverse in a bigger fashion but we want the market to confirm that. We don’t want to preempt the market. Q: What kind of levels are you watching out for the Bank Nifty now post policy? A: 12,960, is quite obvious and very critical. I think yesterday’s high is also a perfect Fibonacci retracement point. There is a good possibility that it will go back to test 12,960, but if it were to exceed that the next level to watch out for is about 13,300 on the Bank Nifty. The predominant strength for the Bank Nifty is coming through Axis Bank. If Axis Bank were to give way, the Bank Nifty would collapse quite strongly because State Bank of India, the main component in Bank Nifty is not looking as strong as the other components of the Bank Nifty. Q: Today is weekly closing as well and there might be some disappointments after the policy – a close below what level on the Nifty will give you an indication that perhaps a fresh short position could be opened up as we head into next week? A: If the markets were to close above 6,083 on the Nifty that will be a buying exhaution but if the market for some reason closes below 5860, that is quite deep. However, 5860-5820 is a very important support. That is the reason why I am saying, I look at markets slightly differently. When the market closes above 6,083 on a weekly basis that will signal a buying exhaustion and it will complete 13 consecutive weeks of higher closes above the highs of the two weeks prior. That signals the buying exhaustion for this market. I will be watching a close above 6,083 and once the market closes above that I will wait for a reversal below the week’s low and then go short in the market. That is the way to play the market and not on a dip below a particular support. Q: You got a sell on Bharat Heavy Electricals Ltd (BHEL) though today? A: Yes. One can see the underperformance of the stock, when other stocks have been performing so well this stock is doing quite poorly. Looking at it from a structural point, if one looks at it from October 2012 highs to the April decline, it is a very clear five down three up, this is a classic bearish setup. But here too, things can change around so one should better wait for the stock to fall below Rs 189 and then go short. One can place a stop of about Rs 197 and the stock is likely to decline to about Rs 170 if it falls below Rs 189.