Dow theory


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Related to Dow theory: Technical analysis

Dow Theory

Used in the context of general equities. Technical theory that a major trend in the stock market must be confirmed by simultaneous movement of the Dow Jones Industrial Average and the Dow Jones Transportation Average to new highs or lows.

Dow Theory

In technical analysis, a theory stating that when the Dow Jones Industrial Average and the Dow Jones Transportation Average both hit a new high or a new low for a period of time, it can confirm a previous, bullish or bearish signal. It is important that both the averages must reach a new high (or a new low) in order to confirm the trend.

Dow theory

A technical trading theory that holds that stock market price trends can be forecast based on price movements of the Dow Jones Averages (industrials and transportation). The theory classifies price movements into individual components of primary, secondary, and daily. Only when both averages reach new highs or lows (one average confirms the other) is a major trend in progress.

Dow theory.

Dow theory maintains that major market trends depend on how the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average behave.

They must move simultaneously in the same direction until they both hit a new high or a new low in order for a trend to continue.

Some experts discount the relevance of this approach as a useful guideline, arguing that waiting to invest until a trend is confirmed can mean losing out on potential growth.

References in periodicals archive ?
Tuscan, AZ, July 05, 2010 --(PR.com)-- The Dow Theory News letter identifies the new stock market status after a year of uncertainty.
Dow Theory Unplugged: Charles Dow's Original Editorials & Their Relevance Today is the most complete collection of the writings of Charles Dow (co-founder of the "Wall Street Journal" and the Dow Jones Indexes, who developed the basic means for monitoring markets that have been in use for a century), economic pioneer and genius of his era.
Two prominent investment publishers, Richard Russell (Dow Theory Letter) and Joe Granville (Granville Market Letter) are into their mid-eighties and still going strong.
Dow Theory Forecasts, an independent investment newsletter is becoming more positive about prospects for the pharmaceutical industry, reporting recently that "there is still value in pharmaceutical stocks.
A cornerstone of technical analysis is the Dow Theory which states that in a true bull or bear trend, both the Dow Jones Industrial Average (DJIA) and Dow Jones Transportation Average (DJTA) must be moving in the same direction.
The investment newsletter Dow Theory Forecasts indicates that it expects slow sales growth for retailers in 2008, because consumers have become less willing to spend.
Horizon produces a range of related newsletters, including Dow Theory Forecasts, The DRIP Investor and The Pure Fundamentalist.
The Dow Theory of Markets, which beat out the other methods from 1900 to 1937, after 1937 never did perform very well at all.
Although technicians have created dozens of methods for charting stocks, the modes most used by technicians include the Dow Theory, the McClellan Oscillator and the Elliott Wave.
The four benchmarks are (a) values of the Dow-Jones Index that are "critical" in Dow Theory; (b) "bargain" prices of the "$3.99 [less than] $4.00" variety; (c) inflation that reaches "double-digit" levels; and (d) polls that show a candidate reaching a 50% preference level.
The various ups and downs are responsible for the bottom line of Dow Theory Forecasts Inc., publisher of a 44-year-old newsletter that has its editorial offices in Hammond.
The pair's technical bull trend credentials, in evolution since early February, are strong, both by Dow theory's higher highs and higher lows yardstick and by a rising RSI momentum indicator (14 day), which is strengthening while still being short of "overbought" levels.