Sushil Kedia Founder of Kedianomics shared his reading and outlook on markets both global and domestic and on specific stocks and sectors.
On US markets he said, "On two different timeframes, there are two outputs I have for the S&P 500. The long term uptrend line of the last one year's rally, may be say 15 months of rally, that trend line is now breaking. Over the next 6 to 8 weeks horizon, there is a much deeper bearishness coming in. However for the very short term trading this hara-kiri of last two days particularly 1000-point drops in Dow Jones two days in a row and then on Wall Street a big fall on Monday, almost always results into a closing price you would see within the next 5 days that is higher than the close of Monday."
"So, very short-term US markets are deeply oversold. As early as today evening a sharp rebound can come. On a month to two months' time horizon these last 4 days of deep cut is just the beginning of the end," he added.
On Indian markets he said, "Nifty was reluctant to go down as much as Dow went down last night, at today's open. Through the day it formed that typical momentum divergence and the down trend line got taken out. The trailing stop on the existing shorts got taken out and as Europe opened, markets have taken a tailspin. So the sort of catharsis that we have seen on Wall Street and in Asia could happen today in Europe and by the time S&P opens, if Europe has rebounded a lot, a trading bottom for this week might be getting established tonight, that is my conjecture, subject to confirmation tomorrow morning."
Speaking about IT sector he said, "On our charts, we don't see any existence of safe haven on the IT stocks. They are late to participate in this downside and the cuts in them are going to be very deep going forward. The downward movement on them has just begun." So, if TCS breaks the recent low, then Rs 200 going out in TCS or even Infosys declining back to Rs 600 area one should not be surprised because the charts are poised for that, he added
"A bounce back for us is more a caution for protecting profits on the short side. There will be very selective few trades that we will actually do on the long side," he said.
Yes Bank which is refusing to decline at all, if it goes past Rs 38 on the cash charts, we will go all in and make a big buy there. BHEL is looking like a very good decent delivery buy but these are going to be volatile markets and in trying to do some bottom fishing, doing aggressive leveraging does not work, he said.
"I am looking at short term trading ideas on the long side and Apollo Tyres above Rs 160 looks good for Rs 184. Even ITC, if it goes past Rs 209 will be a buy. So very few selective long trades," he said.
According to him, there is a deep oversold divergence in momentum in Tata Steel and SAIL, auto stocks may have a dead cat rebound but would prefer to give them a pass because do not see sustained uptrend in them, so we will not put money on them.
"FMCG, he said is a space that is totally divided. So, if HUL is looking like fantastic sell on every rebound with a stop loss of Rs 2275 or 2280, HUL is looking like it will give a 17-18 percent of a cut in a straight line. Asian Paints is looking like it will give a pullback from the highs of about 10-12 percent. While Godrej Consumer Products may be a buy on this rebound as the reversal confirms.
"So the FMCG sector is evenly divided between buy and sells. Banks again on a rebound one should wait, keep the powder dry and on the rebound again find short trades on them", Kedia said.
On Nifty he said, "Once we are above 11760 tomorrow a long trade for a drive back to 11960-11970 looks quite probable. I won't be shocked even if it goes to 12000 but it will have to very tentative trading."
"Similarly. on bank Nifty, should it go above 30500, won't be shocked if glides all the way back to 31500. My call remains that any realistic support and bottom fishing for the time being may not come before 11100 and on bank Nifty before 28200, said Kedia.
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