Dow Theory..

watta heck… Dirk Custard, a technical analyst, is evaluating Dow Theory. Which of the following statements is correct? Statement One: “According to the Dow Theory methodology, a bullish pattern would be characterized by a recovery (advance) that reaches a peak (high) above the prior peak and the recovery should be accompanied by heavy trading volume. Each reversal that occurs following the peak should have a bottom (trough or low) that is above the previous bottom and should be accompanied by light trading volume.” Statement Two: “According to the Dow Theory methodology, a bearish signal occurs when a recovery is followed by a reversal on higher volume and the reversal has a bottom that is below the previous bottom.” One ===== Two A. Yes - No B. No - Yes C. Yes- Yes D. No - No - Dinesh S

I think they are both true. A: this is classic definition of technical UPTREND according to Dow theory. B: this a sentence defining bearish signal. From all the CFAI sample tests I’ve done ( I did three ) I haven’t seen anything this wordy. Just my two cents.

Anyone can point me to where this dow theory is covered in schweser notes? I do not recall this at all…

im guessing its in the technical analysis section…

i’ll go for C

I’d go with C as well. Both statements involve a trend, one bullish the other bearish - which should support the Dow theory

LongOnCFA, Even I can’t recall where the Schwerer notes talked about Dow Theory… and hence the question made it to the forum… Correct answer is C (dunno, how could you all still answer it??) - Dinesh S

One of the extreme outliner. Hopefully, the test is not “left skewed”