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CRITIC Dow theory is not suitable for intra day trading since fluctuation in extremely short period is beyond the scope of DOW theory
More over dow thory is based on ONLY the closing price of the stock and not the DAY RANGE of the stock on any day.
HOWEVER DOW theory is valid even today nay even in future since price is based on DEMAND and SUPPLY which is the golden rule of any market and that is what the foundation of the DOW theory. As per the stats, this theory has been successful 56% of the times.
The point where price fall gets a support in order to avoid further reduction in price is a support zone.
The point where price increase faces resistance in order to keep the price lower is resistance zone.
Steps to determine the market trend using Dow Theory:
1) Take the data of approx 2 years and plot it into line chart.
2) Mark the tops and bottoms. Only significant Tops/Bottoms to be considered; Minors can be ignored.
3) Qualify the tops and bottoms (ex :- Bottom, Higher Bottom, Top, higher Top)
4) Look for a sequence as follows to find the trend.
If the sequence is formed with Higher bottom and Higher Top with significant volume, it is a Bullish trend.
If the sequence is formed with Lower top and Lower bottom with significant volume, it is a Bearish trend.
Charts Used – Line Charts
Minimum Look up Period – 2 years
Duration of trend Forecasting – 1-2 Months
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