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A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits by Michael C. Thomsett

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The Dow Theory Applied

The tenets of the Dow Theory can be observed in the study of price charts, more in hindsight than in foresight. At the moment of analysis, it is more difficult to interpret the meaning of a reversal in price. It might be a retracement or a secondary trend, or it might be the beginning of a new major trend.

As applied to individual stocks, all of the Dow tenets serve as important features of charts and the discipline of technical analysis. To study the Dow Theory in practice, a review of price charts for the industrials and transportations is instructive. Even with the imperfections of price-weighted averages like the DJIA, the tenets of this theory provide a foundation for analysis of trends in individual stocks.

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