Bharat Jhunjhunwala: A Supertrader Who Talks to RSI
All successful traders might have different approaches to trading, their styles may be different, but one thing is common—the tenacity and learning from mistakes continuously. They don’t give up and keep digging deeper, and eventually, the lady luck smiles.
Bharat Jhunjhunwala is no exception. Those who want to learn the secrets of trading and RSI must stumble upon his YouTube videos.. And once you start watching his videos, his accuracy, command over what he says, and overall understanding of the market impresses you.
That’s precisely why we decided to talk to him, and we’re extremely grateful he agreed instantly to give his precious time for an interview. Here is the detailed excerpt of an interview with him:
How your trading journey started.
In 2005-06, I Was doing my Post Graduation in Financial Analysis in Singapore where I used to crunch financial data. That was when the market was in a strong bull run, and whatever I bought it went up. And I considered myself smart. And that’s the illusion that every investor carries in the bull market.
Soon the reality struck the hard way. After the Lehman crisis, my stocks corrected 50-60 per cent. The market went into a downward spiral, touching four digits.
Then, I started thinking fundamentals did not change overnight. Hindustan Unilever and Dabur were selling the same number of toothpaste and soaps as always.
I realized there are some other factors, apart from fundamentals, that drive the market.
That’s how I came to know about a new bird: technical analysis.
What was your learning approach?
I always had a structured approach toward learning. I started looking out for a course, and then I came to know about CMT (Chartered Market Technician). That’s when I studied various concepts about the market such as Dow Theory, Candlesticks, Momentum, Indicators, and various other things.
What attracted you to RSI.
RSI is among the most famous indicator, and I came to know about it through Martin J. Pring book, but when I applied the concepts of overbought and oversold concepts, it was not working. I was still losing money.
Then I heard about Andrew Cardwell, who is known as the ultimate authority on RSI. I joined him and became a part of his club where people learned from each other, and that’s where I learned advanced applications of RSI.
He has two programs: Basic Program and Edge Program. It was an audio program where he shared charts, and you kept making notes. At the same time, my studies about the market were going on.
Gradually, I started sharing my trades with him, and he used to give feedback. That’s how I started making progress.
Where did you make a mistake then?
Like anybody else, I was buying at the oversold position and selling at oversold. However, it does not work this way. Every financial instrument has its rhythm and natural frequency. So, the RSI levels are also unique to them.
For example, if a particular operator is operating SBI, some other operator would be operating ICICI bank, and both of these stocks will have according to the mental approach of the operator.
You cannot have one level-fits all, and RSI levels should be adjusted accordingly. That’s the one critical lesson I learnt only later with time.
Psychology is a critical factor in trading. How did you use it to your advantage?
It is critical to understand one’s temperament to become a successful trader or investor. I am basically a buy-side trader, and I realized soon that I cannot sleep peacefully when I take a futures position. Also, I don’t feel comfortable while shorting.
However, some of my students prefer shorting, and recently also they made good money by shorting Biocon and few other stocks.
Also, though I understand options well, it’s not my game. Some traders, on the other hand, are very comfortable doing options scalping. So, the sooner you understand yourself, the better it will be helpful for your trading health.
What is your approach to trading strategy? I have been following your trading recommendation on Telegram; your accuracy level is fantastic. Sometimes I feel, the stock was waiting for you to enter before shooting like a rocket. How did you achieve all of this?
We have to accept that this is a bull market, and you will have to credit the market.
However, I have developed a system-based trading approach, and I do what my system says. I don’t trust myself; I trust my system.
How did you develop your system?
It was a work in progress; it took almost 7-8 years to finetune it. I have developed my proprietary indicator, B-Xtrender which is also based on RSI; you can call it ‘Chota RSI’. It removes the problem of false Overbought and Oversold signals. The B-Xtrender elucidates the dilemma of differentiating a trend change from a minor correction, thus providing specific entry, scaling and exit signals.
It is an indicator created to give a single glance at the ongoing trend. Even a casual look at the system can acquaint the viewer with the long-term and short-term trends.
It was also published in the International Federation of Technical Analysts. And I am still refining my system and keep learning as that’s the only way to survive.
Now, let’s discuss trade and I will try to understand the logic behind these. That’s the best way to understand your mind and method.
Chart ( Dalmia Brhaat): Understanding the logic behind this trade. You see the daily chart; many things go in the background.
I first analyzed this in the weekly timeframe. Analyzing a stock on a multi-time frame is an essential part of the overall analysis.
It’s essential to see the chart to understand what’s going on in the monthly, weekly, daily and hourly timeframes.
It gives me clarity about the trend. The stock must be trending if you want to make money. If it is not trending, you cannot make money.
If it is following the Dow Theory in a weekly chart, which is making higher high or lower low or vice versa, it’s a trending stock. Since I am a bullish trader, the upward trend is what matters to me the most.
On a weekly chart, Dalmia Bharat is in a strong uptrend; once it is clear that it’s in an uptrend, I waited for its pullback in the daily chart.
Also, if you see carefully, it took support on the moving average and has long-term support for the stock since it spent a lot of time there.
Another very important factor is when the price is falling from the peak, the volume was going down drastically, then a time came when it dried up quickly near the support.
That means the operator had no interest in selling. The supply of the stock almost became non-existent at this point.
And when sellers disappeared, only buyers were left. That’s the scenario when even with small buying, the stock price lifted the stock.
When the price was falling, the volume was not increasing as that would have indicated smart money was exiting.
However, that was not the case here.
When you see the RSI, it was comfortably in the overbought range. On the fundamental side, there was no such problem a. That’s how it became a perfect trade.
How did you select this stock to trade?
You must have heard this adage: the more you sweat in peace, the less we bleed in war. I spent a lot of time in research at EOD and during weekends. I read the chart of every stock in the Nifty 500 universe on the weekly and daily timeframe.
This gives us an idea of the list of strongly trending stocks, I make a list of such stocks separately and that’s how such stocks come to you. It’s a lot of hard work in hindsight.
Do you use an algorithmic system?
No, it’s an entirely discretionary system. I don’t use a logo trading or any blackbox trading system. Everything is transparent, except the indicator. If you use and practice it, you’ll also benefit from it.
Which pockets you see can give a better return in the next 6-12 months.
My view is that realty, pharma, energy are three sectors that we need to keep a tab on. You see the flow of capital rotates between different sectors. And if you see it correctly, the leaders of the bull market change after every correction. Though Nifty Auto is struggling, you have to keep watching.
If you see the Nifty Pharma index chart, some stocks like Dr Reddies Lab, Biocon look really interesting.
Can you elaborate realty sector a bit deeper and also go stock specific?
Yes, in the realty space, I like Prestige Estate, DLF. There is a lot of juice left in the sector. As per my analysis, the realty index may go up by 25%, and when the index goes up 25%, you can easily imagine what can happen to individual stocks.
Prestige Estate and DLF are two stocks; I am extremely bullish. The chart pattern looks fabulous.
DLF has reduced its debt significantly, and on the monthly chart, if you see, it looks very attractive.
What do you see these stocks target after 2-3 years if the story of residential real estate plays out properly.
I am not in the game of targets. I can change opinion instantly if charts change. This entire game of prediction is not good for traders; if a new trader goes into it, it becomes hazardous. I believe in rising the stock trend till the trend is intact. When a stock looks weak, we get out of it without any emotion.
Many people believe in pure price action; they don’t use any indicator. Their logic is indicators are derived from the price, so why use them. Price is the ultimate God they say.
Price, Volume, Volatility, Momentum, Liquidity, and Time (though time is a different dimension, I am not going into it now).
How can you see volatility and momentum? Price action will not tell you that. Adding volatility and momentum indicators helps you understand these two aspects visually.
Price alone does not tell this. And after all, if an indicator has been introduced, it must have a meaning to it.
You can learn a lot about technical analysis on his YouTube channel. His Bazaar Shots podcast provides a commentary on the market where he regularly shares his ideas about the market and discusses stocks. He also runs a training program for wannabe traders, where you learn the tricks of the trade from him under his able guidance. Constant mentoring. To Join his program, click here to join his master trader program.
You can access him at the Twitter profile: @jhunjhunwala_b where he shares his trading wisdom and insights profusely.
And the best part is his Telegram channel where you can access his trading ideas absolutely free: Bharat Jhunjhunwala _ ProRSI
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