Dow Theory and Elliote Wave Theory

1. TECHNICAL ANALYSIS
O.KOWSALYA
K.NANDHINI
S.B.PRASANNA
S.PRIYANKA

2. MEANING:
 Technical analysis is a trading discipline employed to
evaluate investments and identify trading opportunities
by analyzing statistical trends gathered from trading
activity, such as price movement and volume.
 Unlike fundamental analysts, who attempt to evaluate a
security's intrinsic value, technical analysts focus on
patterns of price movements, trading signals and various
other analytical charting tools to evaluate a security's
strength or weakness.

3. DOW THEORY
 The Dow theory is a theory that says the market is in an
upward trend if one of its averages (industrial or
transportation) advances above a previous important high
and is accompanied or followed by a similar advance in
the other average.
 For example, if the Dow Jones Industrial Average
(DJIA) climbs to an intermediate high, the Dow Jones
Transportation Average (DJTA) is expected to follow suit
within a reasonable period of time.

4.  The Dow Theory is a technical framework that predicts the
market is in an upward trend if one of its averages advances
above a previous important high, accompanied or followed by
a similar advance in the other average.
 The theory is predicated on the notion that the market
discounts everything in a way consistent with the efficient
markets hypothesis.
 In such a paradigm, different market indices must confirm
each other in terms of price action and volume patterns until
trends reverse.

5. METHODS:
 PRIMARY METHOD
1.Bullish method
2.Bearish method
 SECONDARY METHOD

6. PRIMARY METHOD

7. BULLISH METHOD:
 A bull market is the condition of a financial market of a
group of securities in which prices are rising or are
expected to rise.
 The term "bull market" is most often used to refer to
the stock market but can be applied to anything that is
traded, such as bonds, real estate, currencies and
commodities.
 Because prices of securities rise and fall essentially
continuously during trading, the term "bull market" is
typically reserved for extended periods in which a large
portion of security prices are rising.
 Bull markets tend to last for months or even years.

9. BEARISH METHOD:
 A bear market is a condition in which prices fall 20% or
more from recent highs amid widespread pessimism and
negative investor sentiment.
 Typically, bear markets are associated with declines in
an overall market or index like the S&P 500, but
individual securities or commodities can be considered to
be in a bear market if they experience a decline of 20%
or more over a sustained period of time - typically two
months or more.

11. SECONDARY METHOD

12.  Secondary trends are typically comprised of a number of Minor
trends. The Dow Theory holds that, since stock prices over the
short-term are subject to some degree of manipulation (Primary
and Secondary trends are not), Minor trends are unimportant
and can be misleading.
 Secondary trends are intermediate, corrective reactions to the
Primary trend. These reactions typically last from one to three
months and retrace from one-third to two-thirds of the previous
Secondary trend Minor trends are short-term movements
lasting from one day to three weeks.
 Secondary trends are typically comprised of a number of Minor
trends. The Dow Theory holds that, since stock prices over the
short- term are subject to some degree of manipulation
(Primary and Secondary trends are not), Minor trends are
unimportant and can be misleading.

14. o In Dow Theory, a primary trend is the main direction in which the
market is moving.
o Conversely, a secondary trend moves in the opposite direction of
the primary trend, or as a correction to the primary trend.
o For example, an upward primary trend will be composed of
secondary downward trends. This is the movement from a
consecutively higher high to a consecutively lower high. In a primary
downward trend the secondary trend will be an upward move, or a
rally. This is the movement from a consecutively lower low to a
consecutively higher low.
o Below is an illustration of a secondary trend within a primary
uptrend.
o Notice how the short-term highs (shown by the horizontal lines)
fail to create successively higher peaks, suggesting that a short-term
downtrend is present.
o Since the retracement does not fall below the October low, traders
would use this to confirm the validity of the correction within a
primary uptrend

15. o Below is an illustration of a secondary trend within a primary
uptrend. Notice how the short-term highs (shown by the horizontal
lines) fail to create successively higher peaks, suggesting that a short-
term downtrend is present.

17. ELLIOTT WAVE THEORY

18.  Technical analyst called Elliott wave also contributed to
explain technical analysis theory.
 Long term pattern of price behaviour of share prices.
 This would explain the bull market
 The reverse pattern would show the bear market.

19. The major patterns in 5 successive waves or steps.
1. Upward
2. Downward
3. Moving up
4. Moving down
5. Moving upwards

22. THANK YOU