NISM Certifications · NISM-Series-XV: Research Analyst · Technical Analysis
According to Dow Theory, a primary uptrend is confirmed when:
Dow Theory confirms a primary uptrend when both averages, the industrial and the transportation, make higher highs and higher lows. Mutual confirmation between the two averages is required; a divergence suggests the trend may be weak or reversing.
- AVolume falls during every rally
- BBoth the Dow Jones Industrial and Transportation averages make higher highs and higher lowsCorrect
- COnly one average makes a new high while the other falls
- DPrices move sideways within a narrow range for several weeks
Explanation
Dow Theory requires the averages to confirm each other. A primary uptrend shows successive higher peaks and troughs in both averages. A divergence between them casts doubt on the trend, and sideways movement is a line formation, not a confirmed uptrend.
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