Technical analyst Sudarshan Sukhani says that the Nifty has been consistently moving up and higher highs are clearly visible.
According to Sukhani, the next target level is 3500 for the Nifty. However, Sukhani believes that this consistent move on the Nifty could lead to increased volatility in the market.
Sukhani further advises that one should not initiate fresh positions in the market and get out of the market, if something happens.
How have you read this run up to 3,400 and what is your next target for the Nifty?
The Nifty is moving up, the uptrend is continuing and so higher highs are being visible. The next target for the Nifty is 3,500 but something much more interesting is going on with the Nifty. What we are seeing today is a gain everyday, 20 points, 15 points, 30 points, although it's really not a given, everyday it is assumed that the Nifty will move up by 15-20-30 points.
Now we have seen this very similar pattern in March 2006. Just a few months ago, we saw the Nifty moving up and eventually, this slow rally in the Nifty led to the April volatility. The Nifty went up in April but with a lot more volatility. That volatility was a sign of distribution that we realised later when hot money was selling in higher prices.
So we have come to that first stage; the Nifty is moving up everyday. I assume that sooner or later, this will lead to increased volatility in the market. We should all be aware that this will be a sign that smart money is selling. So this is not the time for investors to make fresh investments, one should just remain a trader and get in the market and be prepared to exit, if something happens.
Are you saying that we haven't reached the blowout stage yet that will be the last leg of momentum, which might actually come through over the next few weeks?
That is right because there is no volatility in the market; everyday 15-20 points up on the Nifty is a smooth ride. The blowout clearly gives us a message that it is blowing out; that is 100 points up and then 100 points down during the day and then 200 points up by the end of the day.
So this position is not there, it is a very slow, soft, steady rise. I assume that we are reaching that blowout trend and everybody will know about it when the blowout starts coming in; there will be much more intraday volatility.
What is your gut feeling; will volatility take us to form a new high before correction steps in?
I don't know that. I assume that certainly we will keep on going up because there is a sense of disbelief. Now that sense of disbelief must go away and for that, probably we need a higher level for the Nifty may be 3,715 or probably higher than that.
What is your take on MRO-TEK and Indiabulls?
Indiabulls is my favourite and it is doing the right things. It dips and gives many opportunities to get into that ongoing trend. It is a stock that traders should be watching. I don't know if they are doing that but it is worth watching and entering at every dip.
MRO-TEK moved up yesterday on substantially large volumes; much more than the average. I don't know if I can make any comments. Although high volume gap up is something that one should buy, but since I don't know anything about the company, I would just add a caveat that one should get into MRO-TEK only if one understands what it does. So one should use one's own judgment there.
What do you trade with right now if you are trading Nifty long? What kind of stop loss do you keep and what do you trade long?
It would be a wise idea to trade the Nifty long because there are no signals at all that we are going to come back and fall, so the trend is clearly up. If a person has a long position, as I do, and this in fact is a disclosure, the stops would be at least 60-70 points lower than the current market price.
Apart from the Nifty, there are opportunities in the market where there are some forgotten stocks. For example, Colgate is one and we can see ITC, which is now sideways but it could easily break out if the market were to go up. So there are opportunities to go long in other stocks also.
As a technical analyst though, how concerned are you about the price volume relationship of the market?
It is a matter of concern because the volume fuels all the rallies and that is clearly missing here. But I don't pay far too much attention to volume because it is a very big question mark. Volumes can come later on in the rally, we don't know that, so while that is an important factor, my prime basis for a decision is the price action itself. The prices are clearly telling us that they are moving up. The low volatility is telling us that something big will happen soon enough.
Have you taken a look at stocks like Tisco, Sail, even some of the smaller ones like Ispat and Essar?
Tisco seems to be giving the impression that it is drifting. It is sideways, and there are no patterns that can tell us that it can make a Rs 100 move, and that happens with Sail also. So I am not at all upbeat on metals, in fact the ferrous and non-ferrous also. Hindalco made a very small move but Nalco did not. So steel and aluminum are both out of my radar at this time. I am not into them.
What do you see on the charts of BPCL and HPCL now?
Both of them have reached a strong resistance point. Earlier too, I had made the point that IOC has a far better chart. It has broken out of resistance, made a small dip and seems to be making the right patterns for a stock, which is moving up.
HPCL and BPCL are not doing that. They had those reshaped recoveries and now they are standing at resistance. So if at all one wants to go into the marketing companies, IOC is a much better option.
Have you taken a look at any of the smallcaps like Rana Sugars or Malu Paper of late?
Malu Paper had doubled in a month. So anyone who held on to those IPOs and did not sell when it was half, are now probably happy. I get the impression that an IPO that moves up like this, could in fact cross its earlier levels and go to new highs. So it is a speculative buy but it is very interesting for short-term traders.
Rana Sugars is an exception. While the entire sugar pack has been going down and falling, Rana has actually moved up from Rs 17-18 to Rs 31-32, for whatever reasons. There is resistance at Rs 35, if that resistance is overcome, we can see it go back to Rs 52-53, from where it had begun its decline. So, that's a stock that one should buy, once it breaks its resistance.
Have you taken a look at some of the midcap pharmaceutical stocks like Glenmark Pharma, Wockhardt and Matrix Laboratories?
Yes, I get the impression that a lot of these midcap pharmaceuticals like Glenmark, Matrix and Wockhardt have done their bit. I assume that they will go through either a sideways consolidation or a correction and that would be a time to look at them. In fact, it applies to the bigger ones also like Cipla, Dr Reddy's, Ranbaxy, which are still building a base. So this may not be a good time to get into pharma.
Disclosures:
I own a lot of largecaps and midcaps.
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