Momentum Investing

My journey of
Momentum
Investing
Vivek Bajaj
Agenda
Everything about Momentum Investing : 30 Min
My Journey from Active Trader to momentum investor : 20 min
My core model revisited : 30min
Sourcing Momentum Stocks : 30min
7 Working Strategies with case studies: 90min
QnA : 20min (to be posted in social.stockedge.com with #AskViv)
Four 5-minute breaks
Confidential and Ownership of Vivek Bajaj 2

About
Momentum
Investing

Every Object in a
state of uniform
motion tends to
remain in that
state of Motion
Newton’s First law of Motion
Stocks Strongest over
3–12-month look-
back period are also
the strongest over
comparable future
periods!
Jegadeesh and Titman’s Research

Key component of behaviour finance
Under the tenets of behavioural

Prices do not always reflect all
finance, markets are not always
available information because
efficient. Human behaviour
behavioural biases can cause
moves markets and not the
prices to remain too high or too
universal information shared by
low for long periods
the market participants.

How is
Valuation and
Momentum
associated ?
Decoding PE Ratio
PE is a function of market
price over earnings
CMP/EPS = PE
CMP = PE * EPS
Big Wealth formula

R_CMP=R_PE * R_EPS

CERA, Asian Paints,
Typical journey of an amazing stock

Scalping
Spread Trading
My Journey Algo Trading
Swing Trading
Momentum Investing

Scalping
• Trading market in every to recover the

cost of trade + additional small profit
with a very small stop loss
• Started with commodities: Gold, Crude,
Metals
• 3-minute chart of global markets
including EUR, DXY, INR, Gold, Copper
etc
• Strong tracking of data releases and
their micro impact on market

Spread trading
• Calendar Spread Trading between

multiple commodities and currency
• Concept of Forward Curve,
Backwardation and contango
• Predicting the change in shape of the
forward curve

Algo Trading
• HFT Vs. LFT

• NSE Colocation
• Strategies by prop firms
• Strategies by non-prop traders

Swing Trading
• Identification of Short-term Swings

• Trading breakouts
• Trading retracements

Momentum
• Swing for a longer time frame

• Adding a layer of fundamentals for large
positions
• Relative Strength

My Core
Model
Revisited
The Boss
First, There is no "absolute" frame of
reference. Every time you measure an
object's velocity, or its momentum, or how it
experiences time, it's always in relation to
something else.
Theory of Second, the speed of light is the same no

matter who measures it or how fast the
Relativity person measuring it is going.
Third, nothing can go faster than light.

What is Relativity?
Time Relative Expectation Risk Weighted

Opportunities

What is Time
Relativity ?
• There is a pattern in the way the

world behaves.
• Long term patterns are more
accurate

Measure of Relativity
Relationship with the Benchmark
Relationship with Related Instrument
Relationship with Unrelated Instrument

It’s a Race for Money, Honey !!!
Confidential and Ownership of Vivek Bajaj
Relative Strength Indicator
Relative Strength Index
Formula for RS
𝑥(𝑡) 𝑦(𝑡)
RS = ÷
𝑥(𝑡1 −𝑡0 ) 𝑦 (𝑡1 −𝑡0 )
x = Instrument
y = Index (Nifty)
t = Time

Formula for RSI

RS55
75Min Supertrend
RS55
Daily RSI 14
DNA of my
Framework RS21
Weekly RSI 12
RS12
Monthly RSI 12
Swing Trading Vs. Momentum Investing
2-20 Days Swing

R/R : 10/5=2
Short term Swing
20-60 Days Swing

R/R : 20/7=3
Medium term Swing
60-120 Days Swing

R/R : 35/10=3.5
Long Term Swing = Momentum Investing
Confidential and Ownership of Vivek Bajaj 27 27

Sourcing momentum stocks

Key Parameters
FINANCIALS PRICE VOLUME DELIVERY

Major sources
• Scanners
• Trending Stocks
• Themes
• F&F
• Celebrities

Seven Strategies

Sector Rotation
Chart Patterns
FIPA Stocks
My 7 Key
CEPA Stocks
Strategies
Eagle Stocks
Tiger Stocks
52week/ATH Stocks
32 Confidential and Ownership of Vivek Bajaj

Sector Rotation

Theory
• Money Flows from one
Sector to another
• One can Judge the Sector
Movements using
• Price Action
• Breadth
• Delivery
• Pure Data Driven Decision
Making

Chart Patterns

Theory
• There is a pattern in everything

• Market reacts to patterns
• The magnitude of reactions can be
measured
• A hybrid model to Filter the trades
increases the accuracy

37
FIPA Stocks
Theory
• Stocks shows Sustainable Swings when

Fundamentals supports
• Quarterly performance of companies is
a good filter
• Consistent and reasonably good
fundamental is essential
• Price Action with relative strength
increases the probably of success

40
CEPA Stocks

Theory
• Companies with CAPEX plans tend to

outperform for long term
• Last 3 years increase in asset base in
a good proxy to identify CAPEX
• Sector level CAPEX boost can lead to
a broader market participation

43
Eagle Stocks

Theory
• Eagle Bird can fly High and very High

• A hyper momentum Stock that behaves like
Eagle will keep surprising everyone
• High Risk, high Return Stocks

46
Tiger Stocks

Theory
• Tiger represents Strength and Opportunist

• These Stocks are Solid internally and Act only when
there is a reason to attack

49
52week/All Time High Stocks

Theory
• There are Stocks making ATH regularly

• The Action cannot be Random and must be support
by fundamentals
• Quarterly Sales Growth and EPS trend is critical
• Broader monthly momentum is perfect for good
timing
• Weekly Price Action can be used for Entry and Exit

52
Thank you
Let's stay in touch at social.stockedge.com

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My journey of

My Journey from Active Trader to momentum investor : 20 min

My core model revisited : 30min

Sourcing Momentum Stocks : 30min

7 Working Strategies with case studies: 90min

QnA : 20min (to be posted in social.stockedge.com with #AskViv)

Four 5-minute breaks

Confidential and Ownership of Vivek Bajaj 2

Confidential and Ownership of Vivek Bajaj 3

Jegadeesh and Titman’s Research

Under the tenets of behavioural

Confidential and Ownership of Vivek Bajaj 6

Big Wealth formula

Confidential and Ownership of Vivek Bajaj 8

Confidential and Ownership of Vivek Bajaj 9

My Journey Algo Trading

Confidential and Ownership of Vivek Bajaj 10

• Trading market in every to recover the

Confidential and Ownership of Vivek Bajaj 11

• Calendar Spread Trading between

Confidential and Ownership of Vivek Bajaj 12

• HFT Vs. LFT

Confidential and Ownership of Vivek Bajaj 13

• Identification of Short-term Swings

Confidential and Ownership of Vivek Bajaj 14

• Swing for a longer time frame

Confidential and Ownership of Vivek Bajaj 15

Theory of Second, the speed of light is the same no

Third, nothing can go faster than light.

Confidential and Ownership of Vivek Bajaj 17

Time Relative Expectation Risk Weighted

Confidential and Ownership of Vivek Bajaj 18

• There is a pattern in the way the

Confidential and Ownership of Vivek Bajaj 19

Relationship with the Benchmark

Relationship with Related Instrument

Relationship with Unrelated Instrument

Confidential and Ownership of Vivek Bajaj 20

Confidential and Ownership of Vivek Bajaj 24

Confidential and Ownership of Vivek Bajaj 25

2-20 Days Swing

20-60 Days Swing

60-120 Days Swing

Confidential and Ownership of Vivek Bajaj 27 27

Confidential and Ownership of Vivek Bajaj 28

FINANCIALS PRICE VOLUME DELIVERY

Confidential and Ownership of Vivek Bajaj 29

Confidential and Ownership of Vivek Bajaj 30

Confidential and Ownership of Vivek Bajaj 31

32 Confidential and Ownership of Vivek Bajaj

Confidential and Ownership of Vivek Bajaj 33

Confidential and Ownership of Vivek Bajaj 34

Confidential and Ownership of Vivek Bajaj 35

• There is a pattern in everything

Confidential and Ownership of Vivek Bajaj 36

• Stocks shows Sustainable Swings when

Confidential and Ownership of Vivek Bajaj 39

Confidential and Ownership of Vivek Bajaj 41

• Companies with CAPEX plans tend to

Confidential and Ownership of Vivek Bajaj 42