Nifty: Shift in Frequency

January 16, 2013 . FundsIndia Desk

Let me start off with a simple analogy before getting any further. I have an old radio which works pretty fine. I listen to my favorite program in Radio Mirchi every day. Radio Mirchi’s frequency is 98.3 but my radio plays crystal clear audio when the frequency is set at 98.5. Am I worried about it and should I change the radio set? Definitely not. The radio  works fine and delivers crystal clear stereo quality sound with good bass. Why bother to change it.

Drawing to parallel to stock markets, quite often price tends to change gears or a shift in frequency happens. The slope of the trendline you draw would be valid but the placement will have to be adjusted. This is referred to as a SHIFT IN FREQUENCY. Once you understand and aware of this concept, you can literally pull off trades out of thin air. Have a look at the daily chart of the Nifty featured below

Nifty Freq


It’s apparent that the lower blue trendline has been in sync with price and has acted as major support on numerous occasions.  If you notice, I copied that line and pasted it at the intermediate low formed in mid-December. Notice this SHIFTED FREQUENCY line acted as support last week.

Does  this happen often? Yes, a lot. Keeps your eyes and mind open and send me some examples of such shift that you have identified. I will post a few more examples in a later post.

Trade Safe and Don’t Get Hurt.