After a long period of research, I have not found any discernible evidence that technical analysis significantly enhances the performance of momentum strategies. It’s important to be aware that technical analysis is of two types:

• Technical Indicators: These are reasonably systematic and include RSI, moving average, exponential moving average, etc. These are tested thoroughly, and we already use basic ones like moving average, or within some percentage from an all-time high, etc. These work. I haven’t seen anything that enhances performance more, like RSI or donchain channels or similar indicators. The more indicators we add to the momentum strategy, the higher the probability of having a false positive breakout or false positive exits. Churn increases, and returns go down because you constantly enter and exit. In my backtesting, I observed that keeping the core filters like moving average and all-time high, analogous to momentum, is acceptable. Anything else derates the strategy performance

• Technical Chart Patterns—These are discretionary and almost impossible to backtest, so I don’t know how these patterns will enhance or derate the strategy’s performance.

Now, to “whether we should use technical analysis or not?”

The answer is that “it depends” – the traditional momentum factor in academia doesn’t have a moving average filter, nor does it go into cash. But most of us do that to enhance our strategies, and we have found that it has worked historically in our markets. Now, for technical analysis, if you have tested it or are confident that it will increase your performance and help you stick with the strategy, plus make you more comfortable, please go ahead and use it. The only thing to remember is that every technical indicator or chart pattern, or extra filter you add will have a trade-off. If you try to reduce the drawdown to a lower extent, you will lose on cagr. There is no holy grail.

While I follow my systematic strategy according to the rules I have set for myself, I also understand that to make money in markets, having multiple uncorrelated strategies is a must. This diversification ensures that you can stick to the rules and not get bogged down if one strategy is in deep drawdown during the current market regime. It’s a safety net that provides security and preparedness.

True. Understanding the business is paramount. Only after that one digs into the fundamental and technical analysis of a company.

Hello. Is there a link you can share of the source? Thanks

If you look loan book grew at 9% CAGR in previous 4 Qtrs and gross loan origination at 7.5% CAGR.
If we extrapolate this the AUM and GLO should be 9725 Cr and 2219 Cr.
Actual numbers in current quarter (9200Cr and 1840Cr). So total degrowth due to less new loan is 2219-1840 = 379 out of total of 9725-9200 = 525.
So it seems all of the de growth in loan book is attributed to both foreclosure and and de growth in new disbursement (could be attributed to rundown as per commentary in presentation). But mostly it seems like this is the reason and not foreclosure.
Disc: Invested and Biased