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