Market is cracking, go short: Sudarshan Sukhani

The market fell for the second consecutive session on Monday as the disruption in Parliament over the coal allocation issue dampened sentiment. The Sensex fell 104.40 points to close at 17,678.81. The Nifty declined 36.45 points and ended at 5,350.25.

In an interview to CNBC-TV18, Sudarshan Sukhani of s2analytics.com says, the trend is changing. "As of now, the market is cracking. It has given enough evidence that justifies a short position. Just keep volumes low," he adds. Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Q: What is the call on the Nifty for the day? A: We just start again those baby steps on the short side. We bought some September 5,400 Puts, let’s say about 10% of the normal volume. The trend, as far as we understand, is changing. So, we start going with the current trend. Now, this could easily get a whipsaw and go wrong. But I don't think we should be worried about that. As of now, the market is cracking. It has given enough evidence that justifies a short position. Just keep volumes low. Q: Does Zee Entertainment have a bullish chart? A: With a subdued sense in the markets, we should only stay with quality and stocks that are giving distinct outperformance. Zee Entertainment has been a complete outperformer and I would expect that to continue. So, I am looking to go long in Zee. The idea is Zee is trading at 50 day highs and is willing to go up if market sentiment turns slightly positive. The charts are at the top of their price range. So, Zee is a buying opportunity. As usual, wait patiently for the market to show their hand. But this is a buy, not just for day traders but also on a dip for people who are willing to take positions. Q: Ranbaxy Laboratories has moved from Rs 500 to Rs 550 in the last one month. Is that chart bullish too? A: Ranbaxy belongs to the pharmaceutical group which has been a complete change from what the Nifty is doing .The pharma sector has been flying and doing very well. As a defensive, it is probably a favourite when other stocks go down. Ranbaxy has crossed Rs 550 which was its previous high. It has been consolidating for the last two-three days. It’s making new highs but giving up some of these gains. But my sense is, if pharma sector is picked up again for buying as a defensive strategy, Ranbaxy should cross that Rs 550 hump and go much higher. So, I would suggest Ranbaxy as a buy, but wait patiently for intraday signs which indicate that the stock is now gaining momentum on the upside. Once that happens it's not only an intraday buy, but also a positional trade. Q: Your views on UltraTech Cement? A: We are continuing to go long in outperformers and that’s the broad theme. Look for quality stocks, look for outperformers, ignore the others, do not try any bottom fishing. I have been trying to explain this for many weeks now and that theme persists. So, we are going long in UltraTech Cement. The entire cement pack as we understand and we know has been outperforming and UltraTech cement has done extremely well. It made new highs yesterday so that’s a place where we want to go long. Cement is probably a sector that will do well irrespective of what the broad market does. Q: Rural Electrification Corporation (REC) is in your sell list today? A: Financials are getting it on the chin. REC which was giving impressions of entering a bull market has broken down from a trading range. Earlier also Power Finance Corporation (PFC) and REC had started coming in our sell list. REC’s trading range breakdown tells us that lower levels are coming. It is not easy to say if this is the beginning of a bear market or it is a correction. But whatever, at lest we are sure that it is a deep correction. So, there is money to be made on the downside. So, REC is a short selling opportunity as are most financials and banks. Disclosure: I have no holdings in the stocks discussed. _PAGEBREAK_ Q: Would you continue to short Punjab National Bank (PNB)? A: Punjab National Bank is a short sell and it has come earlier in the list but the important point is that it comes with some regret. PSUs banks on the upside, four-five years ago, made a lot of money for traders and investors both. Now the reverse seems to be happening. I have already discussed and said that we don’t understand what is going on in PSUs but something terrible is going on. PNB is making new lows. Why should a blue chip public sector undertaking (PSU) bank make new lows? We don’t have the answer. But we understand and realize that we should be looking to go and sell these new lows. New lows cannot be ever bought. So, PNB at new lows is a short sell. The chances are that it will go much lower before it stops falling and starts building a base. There is no sight of that. Q: You would sell Reliance Capital today? A: The ADAG group in its entirety is now looking weak. Reliance Capital which gave us the sense that the worst is over for it and it may well be, is now giving signs of at least a short-term selling opportunity. Reliance Capital made a small double top and has broken down from it, failed to cross the Rs 385 highs that it had made earlier. This stock itself suggests that at least a move towards Rs 300 before this declines stems. That could be a correction or that could be something worse, we will find out. But, from current levels there is money on the short side in the stock. Q: How would you approach the Bank Nifty after yesterday’s slide? A: The Bank Nifty is a sell. It is the weakest of the indices. It is now leading the Nifty on the downside. An immediate target could easily be 10,000 and probably lower. So, we want to go and sell and be short on the Bank Nifty. As usual, if something changes in the market, use the stop loss. Q: Jindal Steel and Power Ltd (JSPL) is still a bad looking chart? A: Jindal Steel has been a declining stock for months now and that continues. Whatever the reason, the charts are telling us that this is not going to sustain and the charts have been proved correct. So, even for today, I would say Jindal steel is a sell and it is probably a positional sell. Q: Is there more downside in store for Shree Renuka Sugars? A: Most sugar stocks are weakening. Yesterday, Shree Renuka broke down from a trading range and that tells us, if not anything it is going back to its Rs 27-28 levels. That is probably not going to happen immediately. At this point, we are looking at a target of Rs 28. But it could easily revisit its earlier lows. It is worrying but sugar is now on the short side. Q: What would you do with Adani Enterprises now? A: Adani is a sell. Adani Enterprises has been a short sell for sometime now and that trend persists as it makes new lows. New lows in any case are not for buying. We are seeing a theme here. Most midcaps which have some questions relating to them are now being hammered badly. With some regret Adani comes in that category. It is a short sell. Q: What would your view be on Jaiprakash Associates? A: This one is a surprise because I saw JP Associates doing well but it’s cracked, it has not broken its Rs 80 resistance and the sense is that it is breaking down from a trading range. So, JP Associates even to my surprise is a short sell. We look for lower levels, probably Rs 68 or so. The more important message is don’t try to buy stocks that are falling this is not a falling knives trade, none of them. Q: Is Bharti Airtel showing any signs of bottoming out around Rs 250 level now? A: We have been downbeat on Bharti because we explained that the Rs 250-260 level of Bharti was important. Once it cracks that there is a freefall, which means there is nothing to hold it. Now, it may or may not have a freefall. But we cannot hold it, we cannot buy it. It has to be short sold. So, any intraday weakness tells us that sell Bharti. Also Read Sensex may touch 18500 if ECB, Fed eases in Sept: Ambit Cap