The purpose of this analysis is to find a bullish trend using Dow Theory and decide the entry price, stop loss price and target price. We need at least two years of data to analyze Dow theory.
The Line chart of price movement, of Tata Motors, between Sep 2015 and Nov 2017 is used for the analysis. All the significant tops and bottoms are marked as higher top, lower top, higher bottom and lower bottom. The movement from higher bottom to higher top signifies the bullish trend. There should also be significant volume of trade.
I noticed the first bullish trend around May 2016 to August 2016. In this trend, it has breached the previous resistance level (previous higher top) at price level 420. So, we can take a long position after it crosses 420. I have marked a long position at Rs.420. If the price falls from this level, there was a support (higher bottom) at price level 380. Hence I kept the stop loss at Rs.380. My risk here is Rs.40 (420-380). So, my reward should at least be Rs.40. So, I kept my target as Rs.460 (420 + 40).
As per the chart, I would have taken the long position around around June and achieved the target the same month. I have drawn red lines to mark the long position, stop loss position and the target price.
