5900-5930 key support for Nifty; bullish on ONGC: Manghnani

In an interview to CNBC-TV18, Anil Manghnani, Modern Shares & Stock Brokers shared his reading and outlook on market and specific stocks.

Below is the verbatim transcript of an interview aired on CNBC-TV18. Q: Have you seen a breakdown over the last couple of days in the Nifty or you cannot say that with certainty yet? A: We will have to wait a little bit. Yes, the first trigger was the 20 exponential moving averages (EMA) like we spoke last week, below 6,022. However, the first key test for this market is right now, 5,930-5,900ish for a couple of reasons. Over the last eight or nine months especially since somewhere around June when we hit 4,770, every correction has been right just below the 50 day at a major channel that it has formed over the last eight months. Also Read: Optimistic UBS remains bullish on India; sees more FII flow Therefore, that 50 day is at about 5,933 – that channel is about 5,920 and the Fibonacci support is at about 5,900. So, I think somewhere between 5,900 and 5,930 range is the key support for the market and if it can hold, we will look at it as a normal correction that has been evident over the last eight months after every rally. However, any break below that would be the first sign of weakness because it would have broken an eight month channel. So, keep an eye on this 5,930-5,900 range for a key idea, is the market breaking down or is just a small correction. Q: You are buying a heavyweight this morning, Oil and Natural Gas Corporation (ONGC)? A: Yes, little bit of a defensive. I think oil and gas has fairly held out even in this correction because they were the ones that moved right at the end, maybe little under-ownership. However, with Rs 321 being the 20 EMA, I feel maybe ONGC will try to support the market, hold that 20 EMA and bounce. So, maybe just a trade back to Rs 339-342, with a stop below the 20 EMA, which is let’s say Rs 320. _PAGEBREAK_ Q: What signs do you see on the Bank Nifty? Has that also confirmed any kind of breakdown or trading around critical levels? A: A bit of both. I do not think yet any breakdown compared to what the Nifty is doing, still holding up from that point of view. However, given that the 50 day also is around this 12,400, which is what the Nifty is at 5,930-5,940 on its 50 day. It is important that it holds a 50 day average and then tries to bounce from here. If it starts to close below 12,400 then maybe first signs of a meaningful correction in the Bank Nifty also. Q: Any thoughts on some of these public sector undertakings (PSU) faces like UCO Bank, Bank of Baroda (BoB). They are all down between 9-10 percent in the last few trading sessions? A: Yes that has been the problem area for the market. I think except with Punjab National Bank (PNB), which had a good rally post its numbers, most of them if not all the PSUs have really collapsed post their numbers. Therefore, right now they are probably at 200 day averages or 50-week moving averages. So, they deserve a little bit of a trading bounce from oversold levels. Will they bottom-out any time soon? I think is a little too premature to guess on that. However, like I said maybe a little bounce from here because of the oversold nature of most of these stocks. Q: How would you approach trading on the Nifty now, if we do get a pullback this morning, which looks likely? Would you be looking at shorting opportunities or is this zone of 5,950-6,000, not a great trading zone for you? A: Ideally, I would like to short if it closed below 5,900. Therefore, just the way the set up is for now even if one wants to lower risk because if one short below 5,900 then stop loss becomes quite big. So, what one could do is if one wants to trade on the long side then even a pullback closer to 6,000-6,020 levels could be a shorting opportunity, with maybe a stop above 6,060.