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Dowtheory

Dow Theory, AppliedDow Theory is a foundational set of principles that underlies modern technical analysis. One of the main tenants of the theory involves trend confirmation by comparing similarities between equity indices' price behavior. Originally, the Dow Transportation Index was used to confirm trend direction in the Dow Industrial Index. Now things are a bit more complicated, with multiple indices covering a wide array of sectors and ever-evolving niche technologies. To get a confluence of direction across the four major American indices (DJI, SPX, IXIC, RUT) to close the week has not been a simple task. I believe this is one of the reasons why a systemic selloff has been delayed in spite of the increasingly opaque economic picture. There are just too many cross-correlates that offset each other on the basis of what each sector "should" do in such-and-such situation. For example, the notion of fleeing to technology as a safety measure may have manifested as a "real" reaction in the middle of 2020, but it was the media's promulgation of such an idea that popularized it into today's common market wisdom. In any case, I would argue that fleeing into tech will work until it doesn't - and that day is looking closer by the hour. Literally. Just take a look at the four charts displayed above - each of the four indices mentioned sports a bearish hourly candle to close the week. While this is subtle information, I was able to see the price action from a tape reader's point of view, and I will tell you that the price movement during this last hour was categorically different than any I have seen in months. This was real selling; institutional selling en masse. Each of the four underlying ETFs were seemingly stuck in quicksand for an hour and in order to confirm this back=end observation, I turned to the charts after the close. The results depicted above depict consistent heavy selling across all four indices, in the form of nasty looking candles to close the session. Charles Dow and his then-clever, and now-accepted theory, would point to this as a prime example, were he still trying to convince the world of its validity. While nothing is certain in markets, this is some pretty compelling data suggesting that, at the very least, there will be some serious volatility for the first time in a long time. I'm short, but it's not so simple with the other side being a hysterical bubble and all. My suggestion is to get creative and take advantage of the four-way confirm. -ConfirmPig TVC:IXIC CURRENCYCOM:US100 TVC:SPX CURRENCYCOM:US500 TVC:DJI CURRENCYCOM:US30 AMEX:IWM TVC:RUT
TVC:DJIEducation
by UnknownUnicorn5511258
4
PLTR: Harmless pullback or reversal? How to tell the difference!Hello traders and investors! Yes, PLTR hit the $ 27.45 as we said it would in our last study (the link to my previous idea is below this post), but what to do now? The $ 27.45 is a secondary target in my view, but it is working very well as a resistance. Now we can expect some struggle around this area, and the fact that PLTR dropped below its 21 ema in the 1h chart reinforces this idea. It is interesting to notice that it is dropping a lot, but the volume is not that good . This tells us that this is not a true bearish movement, just a harmless pullback. This resistance is quite relevant in the daily chart, and today we have a Bearish Engulfing (so far). This might cause a pullback to the purple trendline or even to the 21 ema again. This wouldn’t be surprising, and PLTR will still remain bullish. Remember: In a bull trend, we have higher highs/lows, but we do have lows . Sometimes, people get anxious when we are doing higher lows, and think it is the end of the world. To identify a harmless pullback, just look at the volume: If it is dropping, with lower volume, than it is just a pullback. This follows the 5th tenet of Dow Theory: The volume must confirm the trend. If the volume doesn’t confirm the trend, we must be careful. If you see a bearish structure, like lower highs/lows, then we are talking about a reversal sign. Today’s movement doesn’t change my target on PLTR, at $ 31.34, and since we bought around the $ 20, we are in a very comfortable situation. If you liked this analysis, remember to follow me to keep in touch with my daily updates. Also, support this idea if it helped you! Thank you very much!
P
by Nathan_The_Finance_Hydra
39
AAPL: A correction ahead?Hello traders and investors! Let’s talk about AAPL today! We are in a strong bull trend, and AAPL is doing higher highs/lows in the 1h chart. I see no clear reversal or pullback sign around as well. The $ 134.58 is working as support, and it was previously a resistance. The 21 ema is quite close to this point, making it a dual-support level in the short-term. If AAPL loses this green line, the purple line is the next target. However, so far, we have no weakness signs on AAPL. In the daily chart, we see that the target for this movement is the $ 136.84, and it seems AAPL will hit there, but the volume is decreasing. This tells us that we might see a correction after AAPL hits its target, but remember: corrections are not reversals. Apple is still in a bull trend, and it will keep trending, as long as we don’t see a clear reversal movement – Dow Theory, 6th tenet. If you liked this analysis, remember to follow me to keep in touch with my daily updates. And please, support this idea if it helped you! Thank you very much.
NASDAQ:AAPL
by Nathan_The_Finance_Hydra
9
Alt season is here! Is Still too late to get in? Looking at the YTD chart of top 10 alts, I found out that all of them have outperformed bitcoin. Eth, Binance, Dot, Ada are providing the blockchain entrepreneurial infrastructure for projects to create Dapps (Decentralized applications) and DAO's (Decentralized autonomous organizations), allowing new decentralized solutions as DeFi, and NFT’s. Fundamentally backed by blockchain technology, a new era of startups promises to disrupt and take market share in many industries, will it achieve it? We don't know, but right now the hype cycle has kicked in and the risk of missing out (ROMO) is higher than investing in crypto. So you’re still not late to buy some alts. This might be one of the biggest alt seasons of all times.
COINBASE:ETHUSDLong
by DiegoCW
LTC possible correction support levelsIf LTC corrects, from the hi/lo and volume I deduced it could reach the marked support levels. From the overall popularity and demand for crypto I think that in the medium-term the trend is looking to be bullish . I know corrections are usually considered 10% falls in price, but for crypto I feel the percentages are a bit off. Feel free to to leave a comment if you have some thoughts on ETH, BTC or LTC :) or if you see something I have missed in this short analysis of LTC. Right now I have a little bit FOMO, but I would feel uneasy just throwing some money into crypto without waiting for a little pull-back, knowing that there is a chance of bouncing from the support levels. I don't see anything like that for the future price of crypto. Is the price going to fall after raising another 10 or 20 or 30%? I don't know.. but what I feel like I might know is - big tech is investing into crypto, and incorporating its platforms (ETH) into their systems. So I feel like a fall of 10 % or even 20 % would be seen as a big buying opportunity by everyone, making the price jump back up. Well, those are my thoughts for now, have a wonderful day! „You don't want to put all your money on one horse in this business; nine times out of ten, the second horse comes first.” Michael Caine
Long
by Ov3rL0rd
Introduction to Dow TheoryThe Dow Theory is the core of contemporary technical research. Its premises have stood the test of time and underpin the study of market behavior research. The basic principles of Dow Theory and their importance in today's markets will be discussed in this article. Origins and History of the Dow Theory Many of the early studies that contributed to what is now known as Dow Theory is credited to Charles H. Dow. Dow's successor, William P. Hamilton, continued to establish and organize many of Dow's initial early publications, including the Wall Street Journal editorials written at the turn of the twentieth century. Robert Rhea, a Hamilton student, was later responsible for categorizing, refining, and formal codifying Dow's fundamental principles, which were set out in Rhea's book The Dow Principle. In 1884, Dow reported an 11-stock stock market average, which he later extended into a 12-stock Industrial Index and a 20-stock Railroad Average. Instead of attempting to gauge market activity by individual stock movement, Dow decided to build an index of stocks that would better represent the aggregate action of the markets. The averages' movement was intended to serve as a barometer of the overall business environment. Since then, the 12-stock Industrial Index has morphed into the Dow Jones Industrial Average, which now contains 30 stocks. Market trends according to Dow Theory Robert Rhea explains in this book that three distinct patterns are considered to prevail in the market according to Charles H. Dow. 1. Primary trend – that lasts from months to years 2. Secondary reaction (intermediate trend) – weeks to months in duration 3. Short term trend – days to weeks The Primary trend The primary pattern is by far the largest, and it is typically predicted to last months to years. Main trends, according to Rhea, are less vulnerable to distortion and therefore provide a more accurate indicator for investment decisions. There are 2 types of primary trends: primary bull trend and primary bear trend . An uptrend is described in Dow Theory as a series of successively higher highs and lows. The concept "downtrend" refers to a sequence of lower highs and lows. Primary trends have 3 phases. A primary bull or bear trend consists of these 3 phases: a) Accumulation phase b) Trending phase c) Distribution phase Accumulation usually happens after a sharp and fast drop in values, usually as a result of companies releasing extremely negative results. At this point, the uninformed market participants are normally incredibly bearish, selling whatever shares they have left at any amount. Market investors who are well informed and trained continue to buy shares at incredibly low levels. The uptrend and downtrend phases make up the trend process. After a sustained and dramatic rise in prices, distribution usually occurs. Both newspapers and news reports are extremely bullish, and businesses appear to outperform. Uninformed market traders are prone to being too bullish, buying up whatever shares are available in the market at any expense, a condition known as excessive exuberance. Margin debt is at an all-time high. During the distribution process, smart investors begin to liquidate shares steadily, taking care not to push down rates too fast so that they can continue to sell at higher prices. The secondary trend or reaction The secondary trend or reaction moves or reacts in the opposite direction of the existing primary trend. It normally lasts a few weeks to three months, but it can last a little longer in some cases. The secondary reaction typically retraces one-third to two-thirds of the spectrum of the primary trend. Any retracement or reversal of more than two-thirds of a percent on big volume typically suggests that the secondary response is a new primary bear market. Dow Theory further emphasizes the value and psychological meaning of the 50% retracement stage, which is a viewpoint held by another influential technician, W. D. Gann. The minor trend Minor patterns aren't taken into account in Dow Theory. “The stock market is not rational in its fluctuations from day to day,” Hamilton wrote in his book The Stock Market Barometer. Minor patterns will last anywhere from a few days to a few weeks. Trade with care. If you like our content, please feel free to support our page with a like, comment & subscribe for future educational ideas and trading setups.
TVC:DJIEducation
by financialflagship
29
AMC: Next Key Points we all must keep in mind!Hello traders and investors! Let’s talk about AMC today! It did some very technical movements, and it is about time to update you since my last analysis (the link to it is below, as usual). In my last analysis we discussed the two most important key points for AMC, the black line at $ 7.63 and the purple trendline . Well, AMC respected again the $ 7.63 as a support level before it defeated the purple trendline, triggering a buy sign. What’s even more curious is that it did break the trendline by doing a Breakaway Gap (yellow area), which is a very powerful sign. A Breakaway Gap is a gap that defeats a support or resistance, in this case, it defeated the trendline and the 21 ema. Now, AMC is doing a pullback to the 21 ema, which is normal and expected. Let’s see the daily chart for more clues: We already talked about how the bulls were in the control of this situation, thanks to our reading of the volume , and the movement seen this week reinforces this idea. The volume is increasing, as the price goes up, all according to the 5th Tenet of the Dow Theory: The Volume Must Confirm the Trend . When we combine our typical Price Action style with a good reading of the volume, we have all the tools we need to trade well. But what now? Pullbacks to the 21 ema are expected, and I believe we’ll see one, but since it did break the bearish sentiment, we can expect it’ll fill the gap at $ 12.91 (red line). If AMC will fly again or not, we don’t know. It feels it is too late to buy it (the good buy was around the $ 7), but if it breaks the $ 12.91, it’ll trigger a Cup & Handle chart pattern, and AMC could easily seek the $ 20 again. This stock is harder to read now, but soon it’ll do something interesting again. And if you liked this analysis, remember to follow me to keep in touch with my daily studies, and to support this idea with your like! Thank you very much!
NYSE:AMC
by Nathan_The_Finance_Hydra
11
TITAN - 5G - Lumen Tech. $LUMN - The 4th Industrial RevolutionI am ultra bullish on Smart cities, AI, edge computing, 5G/6G telecommunications, cybersecurity and AR/VR. Lumen Technologies (CenturyLink) seems to be a sleeping giant that checks all those boxes. Lumen is facing a similar situation as Nokia and Blackberry as value company which is about to enter a second growth cycle, and like Palantir Technologies, it is facing a situation of massive short selling pressure during institutional accumulation. The ruthless manipulation after earnings beat signals to me how bullish institutions are on the company, and the overwhelming (unreasonable) bear sentiment signals that the shakeout is upon us. FA: Highlights: "Lumen Technologies is the only company to win Frost & Sullivan's prestigious 2021 Global New Product Innovation Award". Who are they? - "Lumen brings together the talent, experience, infrastructure and capabilities of CenturyLink, Level 3 and 25+ other technology companies to create a new kind of company—one designed specifically to address the dynamic data and application needs of the 4th Industrial Revolution." - Company website. - Already is the global leader for fiber network. Lumen has the largest ultra-low-loss fiber network in North America with 3.5 million miles of high-capacity. - Owns the world’s most-connected CDN (Content Delivery Network). What do they do? - "Lumen is an enterprise technology platform that enables companies to capitalize on emerging applications and power the 4th Industrial Revolution". They are focused on the 5G/6G sector, which I speculate will see explosive growth soon. - "We integrate network assets, cloud connectivity, security solutions and voice and collaboration tools into one platform that enables businesses to leverage their data and adopt next-generation technologies." - Focused rebranding for edge computing solutions and 5G sector. - Lumen has partnered with VMware to develop cybersecurity software: Distributed Denial of Service (DDoS) Mitigation, Web Application Firewall (WAF), Bot Risk Management (BRM). - Black Lotus Labs is their threat research arm, the world’s most deeply peered networks and industry-leading endpoint protection and datacenter virtualization. Key Products: - Premises Edge: Tactile Internet, Virtual reality, Augmented reality. - Metro Edge: Smart manufacturing, Video analytics, POS transactions, Retail robotics, IoT. - Cloud Core: AI/ML platforms, Big data analytics, Disaster recovery, SaaS, Cloud storage, Hyperscale environments. Clients: - Salesforce, Zoom are big customers already. Financial Performance: - Growth & Trend shows they are almost profitable: Reported a Net Loss of $1.232 billion for the full year 2020, compared to a Net Loss of $5.269 billion for the full year 2019. Excluding Integration and Transformation Costs and Special Items, reported Net Income was $1.801 billion for the full year 2020 compared to $1.409 billion for the full year 2019. The trend is positive. - Cash Flow Positive. - Invested Capital and Total Assets are decreasing, yet total liabilities and debt decreasing, while CapEx is increasing. - Reduced Net Debt by approximately $1.6 billion and reduced leverage to 3.6x Net-Debt-to-Adjusted EBITDA. - For 2021, Lumen has debt obligations of $2.4 Bn still. - However, Lumen had $34.1 Bn of debt in 2020. - LUMN finished the year with $2.9 billion in free cash flow and a requirement of $1.1 billion to meet its dividend obligation. - Insiders & Insider Trading: -0.92% - Institutional Ownership: 79% - About 659 funds hold LUMN, and interestingly enough, while the stock price dumped, Average 13F Ranking has been steadily increasing. This aligns with the Accumulation Distribution model that I presented. - Float: 976.12M. - Short % of Float: 7.51%. - Valuation: 0.97 P/B ratio and 0.64 P/S ratio. Undervalued, by traditional valuations. - Financial Reporting: Solid. - Potential: 5G Market: Market size value in 2020: USD 41.48 Billion Revenue forecast in 2027: USD 664 Billion "The global 5G Applications and Services Market is expected to grow at a compound annual growth rate (CAGR) of 25.8% from 2019 to 2027" (According to 180+ page research report by Fidelity National Financial) - Lumen Technologies should benefit from the growth of the 5G market, so we can expect 25.8% CAGR in revenue from their market share of 5G, and factor in growing market dominance. TA: - Accumulation/Distribution Phases are rather difficult to predict with Elliot Wave Theory, so Dow Theory will be used instead. - Expecting 600%+ move up on breakout. - MACD long term analysis: - Short term outlook: Fib support level, with a big whale buy. Looks ready to move up. - MACD short term bullish divergence: - Stoch RSI indicating possibly one more shakeout: - Historical analysis showing this is likely, if the same whale is in charge: - However, Fib levels indicate that it cannot possibly go much lower! QA: - Interestingly, it would take 5.7 days for shorts to fully cover. It is likely the shorting was used to take the price down from the previous distribution level. Great short squeeze potential. - Naked short selling report collected from FINRA shows that naked short volume was massive in the end of Jan. Most likely to suppress the price at the resistance point. Institutions were not positioned for the breakout yet. - Options flow does not present high gamma squeeze potential, however, the low OI presents a very good long entry. VERDICT: - The company is reducing debt and leverage. This is smart, as there is sentiment that a market correction and stagflation is nearing. - The critical point that investors will need to decide on is if the company can survive such conditions with their remaining debt. At this point, it looks like their debt will soon be eliminated, and they will be profitable. - It is my speculation that in the case of a tech correction, and a rotation into value, tech will still thrive, but it is companies like these - non-speculative, but necessary, will be real winners. A lot of retail excess will be trimmed from unreasonably valued companies. At least some Institutional investors seem to share this sentiment, judging from their accumulation. - This company checks many boxes for me, and looks ready for an explosive move up, so I assign it an S-tier rating. STRATEGY: - Accumulate. - Entry levels: 7.50, 4.00. - Trigger for Long: breakout of falling wedge resistance. - Wave 3 PT: 80.00. - Wave 5 PT: 130.00. I think the Impulse wave 3 target of 80 aligns with the MACD signaling a 600% move-up to come. This is a high probability level. This would put the company's valuation at 86B~, which is not unreasonable, and even still would be undervalued, in my opinion. GL, and if you like the content, give a like, leave a comment, and follow! P.S. Trying to take a more succinct presentation model for DD, based on constructive criticism I have been receiving.
NYSE:LUMNLong
by UnknownUnicorn1043646
9
AAPL: Good reaction above a TRIPLE-SUPPORT level!Hello traders and investors! Let’s talk about AAPL today! In my last analysis, we discussed the possibility of AAPL losing the Pennant downwards, and this is exactly what happened, given the daily chart was too stretched back then. If you missed my previous analysis, the link to it is below, as usual. Now, AAPL is reacting well, and it is trying to reverse this short-term bear trend. The stock is trading above the 21 ema again, this is good, but more importantly, it is doing higher highs/higher lows , and it triggered a bullish pivot point by defeating the red line at $ 136. Now, the $ 136 is working as support, along with the 21 ema. Let’s see the daily chart now: In my last analysis, I set a target at the black line ($ 137), as it was a strong previous resistance in the past, but when AAPL lost the Pennant in the hourly chart, the sell-off was so intense that it lost the black line, and it only found a support in the next bottom area, made by the 21 ema and the red line at $ 132 (previous top) and the purple trendline, filling a gap on the way. This was a very strong triple-support level , and now it seems AAPL is starting to react, the only thing that concerns me is the low volume. According to the 5th tenet of the Dow Theory , “the volume must confirm the trend”, and when the volume doesn’t follow the price, we have a divergence . If AAPL loses this triple-support level again (which will not be easy), then we may start to think about a sharper correction, but this wouldn’t be enough for a reversal yet. We must follow Apple closely, and if you liked this idea, remember to follow me , and please, support this analysis ! Thank you very much. Have a great weekend.
NASDAQ:AAPL
by Nathan_The_Finance_Hydra
5
SPX: New record! What's next? A complete analysis (H,D and W).Hello traders and investors! Let’s analyze the SPX this Friday, and do our usual complete Multi Time Frame Analysis (MTFA) by looking at the 1h, D and W charts! The index did a new record high today, which is incredible, and so far, there’s no top, pullback or reversal sign around here. The black line at 3870 is a support level, but the index could drop all the way to the 21 ema, and the trend would still be bullish. The 3827 seems to be another Key Point , but the 3870 is more relevant, and we can see why by looking at the daily chart. The 3870 is the previous All Time High, and if the SPX closes under it next week, then the odds of a sharper pullback increase dramatically. In the daily chart we have some very solid and strong support levels at the 21 ema and purple trendline area , and this area would be a target if the index loses the 3870 again. We should be aware of the low volume seen this week, which is not following the price. According to the 5th Tenet of the Dow Theory, “the volume must confirm the trend”. When we see a divergence like this, is an alert sign to us. Now, the weekly chart: Yep, the index denied completely the Bearish Engulfing seen last week, frustrating any expectation of a pullback to the 21 ema in the weekly chart. Now, the index is doing another ATH, giving a headache to the bears, and again, not a single top/pullback/reversal sign around. We must keep our eyes open and focus on the points mentioned in this analysis, and if you liked it, remember to follow me to keep in touch with my ideas, and please, support this idea if it helped you! Have a great weekend!
SP:SPX
by Nathan_The_Finance_Hydra
9
SPX: Key Points we must keep in mind!Hello traders and investors! Let’s see how SPX is doing today! The volatility increased a lot recently, and this led to a false breakout from the support level at 3827, which is a Key Point that worked as support and resistance in the past, as evidenced by the black line. Also, the previous Gap area worked as a nice support as well. Since the index is trapped between this black line and the ATH (green line at 3861), and the 21 ema is flat, we can say that we have a Congestion , and the SPX must break free from it, in order to either resume the bull trend, or collapse to lower levels. The daily chart may give us more clues: Yep, the 3827 is the Jan 8 All Time High, and it seems it is working as a support now. Not a surprise, as it is just following the Principle of Polarity of the Technical Analysis. Today’s candlestick is quite impressive, so far, as we have a huge shadow under the candlestick’s body, indicating that the bull trend is still here, and we won’t see it changing until a clear reversal occurs ( Dow Theory, 6th tenet ). If the index loses again the 3827 (and closes under it), then the SPX could drop again to the Purple Trendline, and this wouldn’t be enough to change the bullish bias. The index didn’t even retest the 21 ema yet, so the trend is very bullish, indeed. As long as we don’t see a clear reversal sign, the index will just continue to climb . And if you like this analysis, remember to follow me to keep in touch with my daily studies, and please, support this idea! Check my latest analyses on the links below. Thank you very much!
SP:SPX
by Nathan_The_Finance_Hydra
12