Nifty may correct deeply; short below 5850: Sukhani

It was a weak close for the markets with the Sensex and Nifty losing around half a percent for the week. Throughout the week Nifty remained in a tight 80 point range between 5850 and 5930. Only once, Nifty managed to cross that upper technical resistance level of 5925.

Broader markets fared bas as well. Infrastructure, real estate and power were the major drags. The rupee also ended lower giving up nearly 1.5% over the week. In an interview to CNBC-TV18, technical analyst, Sudarshan Sukhani, s2analytics.com said Nfity is ready for a deep corrections, if it continues to trade below its support level of 5,850 then it would be a short trade. For the Nifty, 5700 is the first target for the correction, but it could easily go lower, he added. "If the Nifty opens lower even by one or five points on Monday, I would be prepared to take a short position," said Sukhani. Also read: Reforms, rate-cut hopes to run mkt till Q4FY13 Below is the edited transcript of his interview on CNBC-TV18 Q: How important is this 5850 getting breached in the last hour of the trading week? A: The level of 5850 getting breached is important because 5850 is the support level which the Nifty had held on for three weeks. The market has been trading in a 70 point range for a little more than three weeks. So, if Nifty goes and touches that support and does that on a sense of weakness and closes there, then there is a sign that if we have a follow through, if Nifty continues in that direction then there is a short trade. It is not just a short trade; it is sign tht the Nifty is now prepared for a deep correction. 5700 is the first target but we could easily go lower. So Friday’s session was of lot of significance but we need this significance to be confirmed by similar action on Monday. Q: So you are not going home for the weekend with short positions and what will your first trades on Monday be? Will you wait or short at the opening itself? A: I am going home with an Option Straddle; both a Call and Put. I am assuming that this 70 point range will not last for many days now. It is going to break out one way or the other. So, whichever way it breaks out that particular option should make money. For easier trades for Monday, if the Nifty opens lower even by one or five points, I would be prepared to take a short position. Q: Tata Consultancy Services (TCS) is in your list, is it the continuous selling that we have seen in IT stocks will end or is it only in TCS you notice propensity to go long? A: It does appear that continuous selling in IT stocks is coming to an end. The CNX IT index has been out performing for the last few days. The signs are now visible that the IT stocks, which have been doing their own thing, are now likely to be part of a rally or at least part of an uptrend while other stocks may do what they wish. TCS is part of those four stocks. TCS independently, is the best and the strongest amongst the four. So the first stock to buy should be TCS. Q: You seem to prefer pharmaceutical stocks, what are the levels you are looking for in Aurobindo Pharma? A; Aurobindo Pharma has been an out performer; it is in a steady uptrend. It goes up, corrects and then goes up again. After a small correction it started a rally. Immediately, we are looking at Rs 200-205 on the upside. Traders should keeps a stop but the chances are that the targets will be exceeded not fallen short. Q: What are you levels for Tata Chemicals? A: Tata Chemicals was in a trading range and literally chopping around. Repeatedly at Rs 350 it finds resistance and then starts falling 30-40 points. That is exactly what it has done. It went up to Rs 350, found it could not cross it and it is now coming down again. An immediate short-term target is Rs 325-330 but that also is the lower end of the range. If it breaks below that level then we are looking at a much deeper correction. For some reason or the other Tata Chemicals is offering bearish patterns rather than bullish.