Dow Theory is an analysis that explores the relationship between the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA). When one of these averages climbs to an intermediate high, then the other is expected to follow suit within a reasonable amount of time. If not, then the averages show “divergence” and the market is liable to reverse course.
Line Chart is used for analysis for a Minimum lookup period is 2 years , duration of trend forecast is for 2 – 3 months. Consider 2 years data to analyse the trend..
mark the top and bottom in the chart , then mark Higher top, higher Bottom, Lower Top * Lower Bottom, High volume of transaction,
Then if the trend is HB-HT seq with high volume and no divergence between Index and stock means it is Bullish
If the trend is LT-LB with high volume and no divergence between Index and Stock means it is Bearish