Dow first used his theory to create the DOW jones Industrial Index and Dow jones Transportation INdex assuming Industries & Transport (Rail) are major contribution to economy.
Dow Theory is more suitable for fundamental analysis for long term investment.His theory may not be suitable for technical Analysis since it is 100 years old and may not be suitable for current economy.
It Identifies trend in the market i.e primary, secondary and minor trend. Primary last for a year, secondary last for 3 weeks to 3 months, and minor for 3 weeks.
One of the main techniques used to identify trend reversals in Dow theory is peak-and-trough analysis. A peak is defined as the highest price of a market movement, while a trough is seen as the lowest price of a market movement.
Dow Theory is more suitable for fundamental analysis for long term investment.His theory may not be suitable for technical Analysis for intraday .
Also it is 100 years old and may not be suitable for current economic scenario.
Bullish :
1.Higher Bottom & Higher Top
2.High Volume
3.No Difference in the sector and Stock
Bearish:
1.Lower Top – Lower Bottom Seq.
2.High Volume
3..No Difference in the sector and Stock
A support level is a price or level below which a stock or the market as a whole is unlikely to go, while a resistance level is a price or level above which a stock or the market as a whole is unlikely to rise
