Dow theory is invented by Mr.Charles H Dow which explains that the market moves in trends. This is used widely to know the trend, bullish or bearish. The trend should be confirmed by volume and the majority in the market should be moving with the trend and not against it..In Dow Theory, Line Charts are used for forecasting the trends. It provides only directional indication and only for the longer duration and does not indicate the shorter reflections In the market, the criticism is that the different trends are not strictly defined. Though a lot has changed in the stock market the basic tenets of Dow Theory still hold water. One should buy at Higher Tops and Higher Bottoms and Sell at Lower Tops and Lower Lows, which are explained in detail here above. Support and resistance levels are important points in time where the forces of supply and demand meet.
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