Objectives of Dow Theory:-
When demand is more than supply; is a time to buy. Higher bottom & Higher Top
When supply is more than demand; is a time to sell. Lower Top & Lower Bottom
One of the criticisms is that following the theory will result in an investors acting after rather than before or at market tops and bottoms.
The theory does not recognize a turn until long after it has occurred and has been confirmed.
Since its an average based on demand and supply, it remains on top of any analysis.
Higher bottom & Higher Top with High Volume indicates the demand zone. i.e. Buy
Lower Top & Lower Bottom with High Volume indicates the supply zone. i.e. Sell
This trend is reliable for short to medium terms. i.e. 2-3 months time
Support is a price level where the down trend is expected to pause due to concentration of demand.
Resistance is a price level where the upward trend is expected to break due to sell-off due to price rise.