Correction over; downtrend continues: Sukhani

Sudarshan Sukhani of Technical Trends feels we are back into a bear market and the corrective uptrend that continued is now over and done with. “The intermediate uptrend that we were seeing so far is now done and over with. That was confirmed with the sharp momentum that we saw throughout the day and the lows at which we closed,” he said. The downtrend pattern, Sukhani said, now resumes now that the correction is over.

The market is going to be rangebound at 2,900-3,200 levels and 2,900 is likely to be taken, Sukhani feels. “2,600 is technical level, but it doesn’t have much visible support. If 2,600 breaks down then — I’m sorry to break this news — we are in a freefall.”

Here is a verbatim transcript of Sudarshan Sukhani's interview on CNBC-TV18.

Q: What did you make of the way the market broke down yesterday and what sort of levels do you start pegging below 2,900?
A: Yesterday, when the markets opened with a downside gap, I felt that the intermediate uptrend that we were seeing so far is now done and over with. That was confirmed with the sharp momentum that we saw throughout the day and the lows at which we closed. Now the scenario is: we were in a bear market. We have got a corrective uptrend that is now, to my reckoning, complete and done with. So the primary trend — the downtrend — resumes. As we stand now, there is a narrow trading range between 2,900 and 3,200. Trading ranges are likely to be broken down on the downside because the trend is down, so 2,900 will likely to be taken out today, tomorrow, whenever.
A theoretical target is 2,600 but it won’t hold because the 2,600 level doesn’t have any other visible support. So my impression is: if and when this trading range breaks down, if it breaks down then we are in for a freefall again. I am so sorry to say all this because I know it hurts everyone but this market is not going to stop at October lows if that happens.

Q: Two frontline stocks that got pummeled yesterday: Suzlon Energy and SAIL.
A: Suzlon Energy got pummeled yesterday because it is in a downtrend. It did not even show signs of life when we were having this small rally except for one day. So Suzlon is not a buying opportunity for traders, for investors, for anyone. We have to see how it pans out, builds a base.

SAIL has been underperforming the market. It has been underperforming as compared to Tata Steel. In a market like this, it is again not easy. I would say if at all somebody wants to go into metals, Tata Steel would be the safest of them.

Q: What do you see on the charts of some of the infrastructure names like IVRCL, which has had a good rally or a GMR Infra too?
A: The impression is that these charts are emerging out of that very sharp down move that we saw. If the markets rallied, construction and infrastructure would outperform. So to that extent the charts are better than some of the names we have discussed. But if in the sense that the Nifty has to rally for these stocks to perform, the good side is that in another significant decline — if we have a bout of declines again — then these stocks may do that much better. So infrastructure is likely to be a relative outperformer.

Q: A quick chart check on Punj Lloyd.
A: Punj Lloyd belongs to that infrastructure construction sector, which is now giving much better chart patterns. This is not going to go against the broad market, but if at all you have a sense that yes, something is going to go up, Punj Lloyd is the first stock that you should be buying.

Q: Assuming that we start somewhere around 2,900, can you still initiate a trade this morning or would you wait to see if those 2,850 kind of levels of last week are holding or not?
A: No. There is only one trade today and that is to go short. So a trader could go short at any level inside this trading range or even outside or below it with a proper money management method: keep a stop. My suggestion was earlier also and now too that the stops had to be wide enough to take care of intra-day volatility. The direction is more or less very clear it is on the downside.

Q: Tata Teleservices Maharashtra at just under Rs 18. How would you trade that?
A: On the chart, there is nothing to buy in TTML but if our promoters are wise and they keep on getting these Japanese companies, then certainly there is an arbitrage opportunity. You buy it hoping that there will be some kind of a rally. But beyond that the charts do not suggest anything in fact telecom itself except for MTNL is a big zero on the charts just now.

Q: What about the real estate pack? What would you do with the stock like DLF or Unitech that’s back to sub-Rs 50?
A: We do not buy them — that has been my consistent refrain and that remains valid even now. So the only other option is can we go and sell them, sell short that’s something a professional trader could consider doing on any rally. The real estate sector can go back and test the October lows even if the Nifty were not to do so there is a lot of weakness possible in that sector.

Q: From 2,860, we saw a mild pullback to 2,877. Do you think it will hold out this attempt at a resistance?
A: My impression is that while 2,877 can easily be broken there will be intra-day resistance. The markets have limits on the upside, so anyone who seems to be looking for a big rally today is going to get disappointed. So whether the resistance comes at 2,880 or 2,900 or X value it’s a different issue. That is not easy to say, but there will be resistance.

Disclosure:
I have delta neutral positions in Nifty and investments in shares.

Source: Moneycontrol