Dow Theory - Lines (Ranging Markets)
A secondary reaction may take the form of a line which may endure for several weeks — where price fluctuates within a narrow range of about five per cent.
Breakouts from a range can occur in either direction.
- Advances above the upper limit of the line signal accumulation and higher prices;
- Declines below the lower limit indicate distribution and lower prices;
- Volume is used to confirm price breakouts.
See Trading Ranges for more detail.