Dow Theory  |  APR 2002

Working Money: Forming A Dow Line by David Penn

Working Money: Forming A Dow Line by David Penn Whether you are buying or selling, believe it or not, it’s good to wait in line. One of the most common aspects of chart reading, the notion of buying or selling breakouts from congestion, has its roots in Dow theory — specifically, in the part of Dow theory that describes line formation. In this context, a “line” is an area in which prices neither advance nor decline by a significant amount over a given period. This period may last anywhere from a few weeks to several months, as the aggressiveness (or lack thereof) of buyers is met with equal aggressiveness (or lack thereof) on the part of sellers. This equilibrium, however, is often short-lived. Sooner or

by David Penn