Investment Process: Fusion Alpha
26 January 2026
Fusion Alpha is a structured investment approach that combines technical analysis with fundamental analysis to identify stocks at an early stage of sustained price appreciation.
Our primary focus is on stocks entering Stage 2, the phase where a stock breaks out of a prolonged consolidation and begins a meaningful uptrend. Historically, this is the stage where investors participate in the bulk of the trend, provided risk is managed well.
See more details about different stages of technical analysis here.
1) Initial Screening
We begin with the universe of listed companies having a market capitalisation above ₹500 crore.
As of 26 January 2026, this universe consists of approximately 1,862 stocks.
Every weekend, we review the charts of these companies to identify:
Prolonged consolidation patterns
Early signs of accumulation
Stocks that are relatively lesser-known and not already extended
This exercise helps us build an initial technical watchlist.
✅ Around 150 stocks are shortlisted at this stage.
2) Shortlisting
From the initial watchlist, we further narrow down stocks that show a higher probability of transitioning into Stage 2 ahead of others.
This shortlisting is based on:
Tight price structure
Improving volume behaviour
Relative strength compared to the broader market
The objective here is not prediction, but probability.
✅ This process typically reduces the list to about 30 stocks.
3) Final Selection
Once a stock qualifies on the technical setup, we pass the stock through SQML framework to ensure no red flags fundamentally.
Opportunity Size, Business quality, Earnings visibility
Quality of management
Margin of Safety
Longevity of growth
Only stocks that meet both technical and fundamental criteria are tracked closely.
When such a stock breaks out of its consolidation zone, we release our recommendation along with a clear investment thesis, outlining:
The rationale for the entry
Risk parameters
Key factors to monitor
4) Selling Criteria & Risk Management
Stocks, like businesses, go through different phases of growth. Some grow steadily over long periods, while others experience sharp but unsustainable spikes. Our preference is for stocks that demonstrate consistent and sustainable trends, rather than short-lived momentum.
That said, discipline on exits is central to Fusion Alpha. We may partially or fully exit a position under the following conditions:
A parabolic move over a short period, warranting profit booking
The stock hits the predefined stop-loss
The stock falls below the 40-week moving average, indicating a potential change in trend
(What is the 40-week moving average? We will cover this in a future blog.)
Who Fusion Alpha Is Suitable For
Fusion Alpha is designed for investors who:
Prefer a rules-based, disciplined approach combining technical and fundamental analysis
Are comfortable with medium to long-term holding periods and trend-based investing
Understand that drawdowns and volatility are part of equity investing
Value risk management and predefined exit criteria over short-term excitement
Are willing to follow a structured process rather than act on tips or market noise
Seek participation in sustained trends, not intraday or short-term price movements
Who Fusion Alpha May Not Be Suitable For
Fusion Alpha may not be suitable for investors who:
Expect guaranteed returns or fixed performance outcomes
Are uncomfortable with interim price fluctuations or temporary drawdowns
Prefer intraday trading, scalping, or very short-term speculation
Tend to frequently override discipline due to emotions or market news
Are unwilling to adhere to predefined stop-losses or exit rules
Seek immediate results rather than process-driven outcomes over a full market cycle
Closing Thought
Fusion Alpha is designed to balance opportunity with discipline—participating in meaningful trends while managing downside risk. The focus is not on frequent activity, but on selectivity, patience, and process-driven decisions.
Happy Investing!
