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The Power Of Technical Analysis

Monday, September 21, 2015

With expertise in Elliott Wave and Neowave theory and over 13 years of experience as a Technical Analyst and regular contributor under the “Technically Speaking” Column of the Economic Times, Birendrakumar Singh is AVP, Technical & Alternate Research at Systematix Shares & Stocks. In conversation with Dominic Rebello this M.Sc. in Statistics from Mumbai University, espouses his belief in Technical Analysis with the belief that patience and conviction are the keys to be successful on the markets. His views...

A little background about your company and yourself…
Systematix Shares provides advisory services to FIIs, DIs, Ultra HNI and HNI. I have completed MSC in Statistics in 1992. Thereafter, I started preparing for the competitive exams like Civil Service- UPSC and State Service- MPSC. I cleared one of the state services exams and joined the Planning Department of the state Government as a Planning Officer.

At what point had you given a thought to making a career in the financial markets?
In 1994 when I joined the State Government, I wanted to engage myself in some kind of scholarly activity. In due course, I came in contact with Vivek Patil, India’s foremost Technical Analyst. He introduced me to Technical Analysis. Then from 1997 onwards, under his guidance, I developed a passion for Technical Analysis. He introduced me to Wave Analysis, as propounded by Glenn Neely. From 1997-2004, I spent time in understanding Wave Analysis. In 2004, I resigned from the government although it was a highly prestigious job, because, by that time I had thoroughly understood wave analysis and had developed a passion for Technical Analysis. Since, 2004 I have devoted my full time towards Technical Analysis.

How do you pick your trades/investments?
I use Neo Wave Analysis for long term analysis of stocks and for short term trading analysis I use patterns and Oscillators.

How would you describe your methodology?
For long term analysis, I analyse quarterly and Monthly charts based on Neo Wave Analysis. Then I look for stocks forming multi month patterns. For example, Reliance is forming a “Triangle” pattern since January 2008. It’s a good 7 years of consolidation and till date the pattern is still under formation. So also, Tata Steel is in long term consolidation forming a “triangle” pattern since 2008 and is still under formation. To me, front lines stocks and are in long term consolidation and technically appear to be a good picks.

And secondly stocks those have been in multi month consolidation and have given a fresh breakout. Like L&T has been under consolidation between November 2007 and September 2009. It witnessed a breakout in May 2015 and once again in consolidation just at the breakout level. So, technically, L&T would be a good long term pick.

What differentiates you from other traders/Investors?
I along with the other group members of our ASA Technical team, meet whenever it appears that there is a turnaround in markets trend. We purely use Neo Wave analysis to indentify change in trend. So identifying changes in market trend purely based on Neo Wave analysis, which differentiates us from the others.

Is there any applicable lesson to investing?
Yes, patience and conviction are the keys. You have to have a lot of patience at the time of entering at predetermined levels and then it requires conviction to hold on the stock till the pattern implication is achieved.

How much of what you do is gut felt?
Gut feeling does help at times, but only after acquiring thorough knowledge on the subject.

Do you try to anticipate or follow market trends? What is the basis?
I follow the trend. Occasionally, I do anticipate trends which are at major turning point based on Neo Wave analysis.

When you put money on a trade and it goes against you, how do you decide when you're wrong? What do you do next?
I never average when the trade is against me. I cut losses when I go wrong in speculative trades. For long term picks, I don’t put stop losses; however, I do trade in small portions of my long term pick when the market is not in bull phase.

Any positions you ever lost sleep over? What happened...?
Yes, during the 2000 Dot Com bust, I made huge loss in an IT scrip, it was considered to be one of the front line stock at that time. I had to exit at a huge loss.

Where do you see the Indian markets five years down the road; Any number for the Sensex in 2016?
Based on Neo wave analysis, the Nifty downtrend would continue till March 2016. The downward target and support for 2015 is placed at 7001. If it holds and move above 8300 in 2016, then Nifty can move up to 9119 level once again. However, a major bull trend would begin between 2018 and 2022. I mean similar to the bull market trend of 1970 and 1980.

So, up to 2018 - 2022, Nifty would move in a range, bottom would be ~7100 - 6700 and at the higher level 9100 would be the resistance. Then a massive bull rally would start ~ 2018 - 2022.

Your success mantra?
My experience is that an actual benefit from successful investment takes considerable time. For that, one needs to have a lot of patience to hold on to stocks for years. The analysis part is not that difficult, but it requires the right kind of attitude to enter at the right level and hold a stock with a conviction for considerable periods, especially when the market is not in a bull phase.

While trading gives you small return repeatedly, one needs to have a good strategy and strict discipline. For successful investment or trading one need to have realistic understanding about the market. This can come through guidance from the people who have been successful in markets.

What is your take on the current market scenario, Indian as well as global?
A down trend till March 2016 with a bottom, which could be anywhere between 7000-6700 and then a pullback to 9100 is possible. The US S&P 500 is in a sideways or negative trend for the next two years.

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