Dow theory is based on the concept of demand and supply.
If D>S then price increases and if S>D then the price decreases.We can BUY when the trend is higher bottom-higher top with a good volume and can SELL when the trend is lower top-lower bottom with a good volume. There should be no divergence between the Index and the stock. Dow theory is reliable for 2-3 months. Support is an area where BUYERS are sitting to buy to stock in case if the price falls at that point. Resistance on the other hand is an area where SELLERS are sitting to sell the stock in case if the price rises to that point.
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