Technical Analysis is not just

about Trading
Nooresh Merani
www.nooreshtech.co.in

www.nooreshtech.co.in
 Introduction
• IT Engineer ( many here)
• Quit an IT Job ( who doesn’t
want to)
• Blog, Tweet, Chat
• Full time for 10 years.
• I am not a CMT
• I am not a MBA , CFA , CA
training sessions on
• 100-200 +
Technical Analysis
• Pakoed thousands of people in
Technical Seminars ( U are not I am a
the only unlucky audience) “Trader”, “Adviser”, “Educator”
• 2500 posts nooreshtech.co.in
•
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 Technology - Trader/Adviser and Trainer

Remember Free Blog –

Communities Google bought it Group Messaging

Google Search Met the Best of

Marketing /Ease Video Analysis.
Investors/traders
on Advisory

Tweetups, Reach
Personal Chat,
Friends, Learning, Groups
Awareness

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How to Invest Technically !!

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Technical Analysis

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 Myth - Technical Analysis is for Day
Traders
• The biggest myth about Technical Analysis is that it
can be used only for quick traders doing day
trading, swing trading.
• Its all about Buy XYZ Ltd at 100 rs stoploss 96 target
106 !
• Then everyone keeps shouting about  Maine Bola
Tha 
• There are so many business channels and so many
analysts !!
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Lets Start with What we do on TV

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 Number of Traders in India
• Number of Demat Accounts = 3-4 cr.
• Number of HNI accounts = 1.25 lakhs ( Multiply by 3
as below data is only CDSL ) so say 4 lakhs.
• How many of these will be traders ? Some may not
have any demat holdings – But still how many ?

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Advisory Services – More Advisors than Traders

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Algorithmic Trading and Options

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 Technical Analysis for Long Term
• Long Term Uptrends start with multi-year
consolidations.
• Not difficult to spot Multi-Year High Breakouts and
Momentum.
• In a long term uptrend – Benchmark Indices
continue to make Higher Tops and Higher Bottoms.
• Lets look at previous such cycles with examples.

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Long Term Analysis of Broader Market
Trends - Nifty and Broader Indices.

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The Market has Three Trends

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Multi-Year Highs and HT HB

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 Dow Theory - Major Trends Have Three Phases:

• Accumulation Phase - > Smart Investors recognize worst is

over.
• Public Participation Phase -> Business Improves and price
advances with technical trend followers participating.
• Distribution Phase - > Newspaper Headlines, Economy
shining, Public euphoria, Smart Investors selling.

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Sensex – 2003-2007 after Multi-Year Highs

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Sensex 2008-2010

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Investing in strong uptrends.

A 6 yr breakout a simple
time to Invest and Ride

The next time Sensex

crosses 30k could it be
another Invest and Ride

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 Random Portfolio in a Trend

Time Frame – oct 2013

to oct 2014

http://www.nooreshtech.co.in/2014/10/best-time-for-advisors-to-show-performance-reportscagr-to-sell-
their-services-part-1.html
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 Investing at Technically Bottoming out
Zones - RSI / Channels/Sentiments.

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 RSI –Oversold Zones – Deploy Cash
• Deploy cash in parts at Oversold zones.

1. Deploy at 30 RSI if there are technical supports. (

Preferably in Higher Tops Higher Bottoms)
2. Deploy majorly on Positive Divergence and Second
Bottom.
3. Beg Borrow Steal and Deploy on Positive
Divergence and 3rd Bottom.

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 Nifty – RSI in 2015-2016

Positive
Divergences No Positive
Positive Divergence Yet
RSI at 30 &
Divergences
Channel Support

Positive Divergence
and Channel Support
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 Nifty 2013-2014

In an uptrend –
No dips to 30
RSI

Positive RSI 30 with

Divergences Previous
Positive 3 bottoms and 2 Bottoms as
Divergences divergences support

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 RSI Strategy – Customizations
• Prefer to buy stock specific in oversold zones.
• Bounce of 6-10% on Nifty and a much bigger bounce on 3 bottoms
with divergences.
• Deploy cash in 2 steps at 30 RSI and Positive Divergence.
• On 3rd Bottom buy into Call Options.
• In a strong uptrend – Multi Year Highs / All Time Highs there may not
be dips to Oversold Zones.
• Book Partial Profits at 70 + RSI.
• Traders can size up more on Positive Divergences as better risk-
reward.

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Sectoral Leadership

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 Sectoral Leadership
• Check Sectoral Indices on NSE / BSE
• Sometimes a lot of stocks within similar sectors look to be breaking
out. ( Ex – Sugars / Textiles/ Chemical/Paper ) which do not have a
sectoral index.
• Look for New Highs/Relative Outperformance to Nifty/Sensex.
• Sectoral Trends start with Larger Names and end with Microcap
Names rallying. Example Lupin to Lincoln Pharma

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FMCG – 2009-2013 – ITC ended up No 1 on Nifty

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Pharma Index – 2012-2015 –Started with Sun Pharma/Lupin
ended with Lincoln/Marksans

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 Techno Funda – Textiles Sector
• All the stocks in the sector first gave a breakout in
Mid of 2014.
• A further confirmation with strong volumes in 2015.
• At the same time Index had topped.
• Strong relative outperformance suggested
something big is cooking.

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Vardhman Textiles – The biggie
Further
confirmation

Big cup and

handle pattern
Of 5-8 years

Volumes

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KPR Mills – Shift to Garmenting

Big cup and

handle pattern
Of 5-8 years

Volumes

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Welspun India – Its never too late in a
trend
Further
confirmation

Big cup and

handle pattern
Of 5-8 years

Volumes

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Himatsingka Seide
Further
confirmation

Channel Breakout

Volumes

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Kitex Garments – Never too Late

Trend Continues

Big cup and

handle pattern
Of 5-8 years

Volumes

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Indo Count – What a Miss – be patient

Further
confirmation

Big Trend
Breakout
Of 5-8 years

Volumes

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Indo Count – What a Move !!

20-30 x in 2-3
years

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 Heart Burn of Catching it Early,
Buying tiny only but not riding it

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Welspun Syntex – IFCI sold at 60
giving the trigger
Further
confirmation

Big Pattern
Breakout
Of 5-8 years

Volumes

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Increasing Cash on Topping Out or
Breakdowns in Long Term Trends.

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 When to Start Increasing Cash
• Previously we focused on RSI as a good tool to
deploying cash and selection of sectors through
relative outperformance.
• Now comes the part of when to increase Cash.

• Channel/Trendline and Higher Bottoms Break.

• BSE Smallcap/NSE Smallcap start outperforming
Nifty by a big margin.

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Bottom Breaks
And Unable to Nifty – Last 2 years
cross previous
Trendline/Channel
highs in the
Breakdown
pullback

Breaks the
bottoms and
trendline at
8400-8500.

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 Bottom
Breaks Nifty 2009-2013
And Unable
to cross
previous
highs in the
pullback

This was a
tough zone.
Whipsaws
with new
highs and
new lows in
months

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2005-2009 – Trend Followers Paradise
Bottom Breaks
And Unable to
cross previous
highs in the
pullback

Start of the the

major trend

Trendline breaks
too and what a
downtrend.

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 Smallcap and Sensex
Smallcap in an
Smallcap – Moving opposite direction !!
in Direction of
Sensex. Although
Smallcap in an
outperforming.
opposite direction !!

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MultiBaggers – Google Trends crosses 2007
highs !!
Wrote this
post on
06th
January
2016.
Did
increase
cash and
re-jig
portfolio
but not
enough 

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 2010 Rally and 2013 Panic
Smallcap – Moving
in Direction of
Sensex. But a
vertical move with
no pause !!

New lows below

2011. Panic in
comparison to
Sensex

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2007 – As vertical as it can be !!

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Full Time Trader !!

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A Full Time Trader is the best Career

You can trade from anywhere with a laptop and a steady net connection.

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 The Wow Factor
• Market timings 9.00 to 3.30. ( Wow a 6 1/2 hour working day. )
• Work from home. ( Who doesn’t love to work in their boxers ? )
• No Boss, No Appraisal ( I am the Boss )
• Total Mobility. Work from anywhere with a net connection ( Did
you not see that picture of a trader with a laptop in Goa ? )
• Tons of Money ( If you are full time trader you make more money
with the keyboard in your hands )
• More time with Family. ( What would i do if i get done at 3.30)
• I can take vacations whenever i want to ( and pray its not the big
up or down day – for a discretionary trader. Traders are more
weekenders )
• I just need to keep executing the system and chill. ( The backtest
results are just too good to think of position sizing)
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 If you are Salaried
• A Monthly Pay Package – ( It always small but it comes.
Traders have bad months)
• 20 days of Paid Leave ( Create a Clone or Black Box
System or try trading on a vacation)
• Salary – Appraisals, Job Switch ( Traders have
drawdowns )
• Job Security or Alternative Opportunity. ( A trader can
only become an advisor with all the tensions )
• Experience increases value in job market and even
bonuses . Look at your boss he is older mostly not
smarter. ( Return depends on Market Trends not your
Age )

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 What you need to Learn
• Everyone has a different methodology and belief.
• Technical Analysis, Derivative Strategy, Options Strategy, Day
Trading, Delta Hedging, Automated Trading Systems, Trend
Following,Gut Feel, Insider Trading, Tips, Advise etc.
• There is no point on debating which is the right way.
• Understand yourself before you understand the system.
• Every Trend creates a few Geniuses.

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 Simple Rule

Whatever Works and Makes Money

Consistently.

What works for me May not work for

You.

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A standard Trader Problem

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 Find What Works for You
• Technical Analysis the Classical Way.
• Price, Volumes, Moving Averages, Patterns and
Individual Discretion.
• Techno Fundamental Analysis.
• Value Investing.
• Risk Management ,Common Sense & Luck.

Above Works for Me

• No Elliot, No Gann, No Time Cycles, No System Trading.

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 Some Questions
• Are you wanting to be a Full Time Trader because
you don’t like your Job/Business ?
• Are you in love or addicted with Markets ?
• There is no better thrill then a Winning Trade?
• I want more time for Family Life?
• How Long will I work for Someone?
• I want to be my own Boss?
• I want to make a lot of Money?

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 Yes for Any Questions ?

Don’t think of Full Time Trading !!!

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 Trading Income
Capital Did we Miss
Did you even think You
( Yours or Others or a Prop Book ) Will Lose Money ??
Something ??

Trade Markets Remove Money

( Use whatever Works ) (Expenses, Luxury, Savings)

CAPITAL + RETURNS
Add Other Income
(Salary/Consulting/Business
etc )
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 Assumptions
• A lot of people have discussed strategies and will
discuss ahead.
• I leave it to you to find what fits your temperament.
• Always remember – Every trend creates New
Geniuses. Check anything over multi year cycles.
• You will not use Crazy Leverage and lose 40-50-100-
150% of your portfolio.
• You will make returns more than the FD rate

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 Simples Business
Raw Material
Buy Lemons, Sugar Salt and Ice
Raw Material is a big
criteria.

Capital = Raw
Material of Trading
Make Nimbu Paani Business
( learn recipe)

SELL at a CRICKET GROUND

PROFIT

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How Much Capital Do You Need to
Become a Full Time Trader

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What do you Need to Become a Trader

•That’s so F$^$^$in
•Bank Account with lots
of Money easy.
•PAN Card •You need 45-50
•Trading Account with 45 certifications to open
signs. a Hotel .
•Computer/Laptop. •In Bull markets
•Software.
people want to
become full time
investors/traders

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How much time it takes for others

Engineering – 4 years+ Work Experience

Doctors, CA , MBAs – 5-8 years.

Business – Few Years to Learn and Money.

Why do we Think We can Become Profitable

Traders in few days/months
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Lets Say you found a Strategy Which
works with bearable risks.

Go to Next step of Capital Needed.

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 How much do you need to Survive
• Assuming you will have all your income only from
markets for ease of calculation.
• Start with your Annual Expenses ( Include monthly
expenses + contingency fund + more )
• How much do you make in your Salary, Business.

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 Sample Example

Annual Package = 12 Lakhs

Annual Expense = 8 lakhs

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Returns in a Year ? Consistently YOY

10% 50%

20%
Stop There

30% Is there anyone who can make more then that

consistently.

I plead you to take my money and all I can

40% borrow and give me half of profits. I retire
peacefully from trading
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 The Capital Matrix

Exp
Earnings Wanted Capital
Return
1200000 10 12000000
1200000 20 6000000
1200000 30 4000000
1200000 40 3000000
1200000 50 2400000

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WHOA – We know the capital needed.

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 You forgot Inflation.

Also you are used to growth in

Salary/Business.

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 Considering 5% inflation

Expected Exp Capital to be

Capital
Earnings Return added
400000
1200000 30
0
420000
1260000 30 200000
0
441000
1323000 30 210000
0
463050
1389150 30 220500
0
486202
1458607.5 30 231525
5
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 The Big Bad Questions
• Will Returns be Linear at 30%
• When do you decide you cannot be a Trader.
• ( 30% capital loss or how many years)

In Minimum case you need 5x your Annual Income.

A logical case you need 10 times your Annual Incoem

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 The Big Bad Questions
• Will Returns be Linear at 30%
• When do you decide you cannot be a Trader. ( 30%
capital loss or how many years)
• Do you have an Emergency/Contigency Fund?
• How will you pay up your expenses in times of
drawdowns. You may essentially need at least 1 – 2
years salary in addition to your trading capital.
• Will you be able to add capital with increasing inflation
or do you believe that a couple of years as a fulltime
trader your expected returns should increase ?

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 In Minimum case you need 5x your Annual Income.
A logical case you need 10 times your Annual Income

Its Advisable to add other forms of income to give

comfort.

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How much Capital to be a Full Time
Investor

Considering a 2-3% dividend yield portfolio as the only

income.
Capital requirement = 30-50 x the Annual Income.

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Questions !!!

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 Nooresh Merani
Cell: +91-9819225396

nooreshtech@analyseindia.com

twitter.com/nooreshtech

www.facebook.com/nooreshtech

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 My Evolution
2004-2006 •Doing trial and error with
indicators/systems etc.
•Lost a lot and in debts.
•Learnt what not to do.
•Path to Recovery of Loss.

•Paid Debts. Got Some Capital from

work.
2007 •Made lot of Money for Clients. So
high Advisory Income.
•Started Training.
•A fresh tryst with Derivatives.
• 6x in 6 mths

•Royally screwed – 6x to X.
2008 •Sit on Cash.
•Advisory/Training slows down.
Clients make their own mistakes.
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• Capital reduced from peak.
 My Evolution
Mid 2009 •Nothing to do. No trades.
•Played Cricket/Football.
•Learning through smart people.

•Picked the Turnaround.

2009-2010 •Growth in
Advisory/Training/Trading.

•Consolidating time.
2011-2013 •Lots of ups and Downs but nothing
major apart from one big trading
drawdown.
•Tried a few things and luckily
closed quicker before the things
changed. ( Broking, tie-ups, Sales
Team) www.nooreshtech.co.in
•Got married  in 2012
 •.
End 2013-2014 •Focused Effort on Trading with Higher
Capital.
•Strong growth in Advisory/Training also
continuing the Consulting.
•More Reading/Meeting People.
•The Best Year – Due to Bull Market.
•Trading Income – Much more important
than every other revenue stream.

•Believe there is a big opportunity in

next 3 years.
2015-2018 •Major Focus on Investing for Long
term and Trading on Techno Funda.
•Create Wealth for Clients and Self.
•Write and Train More !
Major Aim – Be able to do
what you like !! www.nooreshtech.co.in
 Multi Year Trend Breakouts
• You just need to get one bull cycle or a bear cycle
right in a lifetime to create some serious money.
• Lets look at an example of 2005-2008 how it could
be seen on Technical Charts.
• Will look into our older presentation ( Post 8000
boom or Doom in Sept 2005 ) in next session.
• In 2005-2008 it did not matter what you bought.
• In a bull market its about allocation more than
selection !!

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Nifty 2005-2008

Multi Year Breakout

Signal.

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 Technical Breakout at 6400.
Political Breakout at 7200/7600!!
• While everyone was trying to look at how many
seats does Modi get , the market had already
presumed and participated.
• We came out with a highly bullish report ( kept it
paid ) in March end 2014. ( in next presentation )
• So the trend was clear and just see how one does
not need to be smart in a multi-year trend.

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Nifty Breakout in 2014-2018 ?!!

Multi Year Breakout

Signal.

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 Nooresh Merani
Cell: +91-9819225396

nooreshtech@analyseindia.com

twitter.com/nooreshtech

www.facebook.com/nooreshtech

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