The beginnings of modern-day technical analysis were developed by Charles Dow who created the Dow Theory around 1900. Dow wanted a method to see, either directly or indirectly from the Dow Theory, the trending nature of prices, prices discounting all known information, confirmation and divergence, volume driving changes in price, and support/resistance lines. Today, the public watches the Dow Jones Industrial Average (DJIA) as an indicator of the sentiment in the market. DJIA is a direct branch of the Dow Theory.
Interestingly, Technical Analysis lay basically dormant until the 1960’s. Between Dow and the 60’s, professional traders like Jesse Livermore, Ralph Nelson Elliott, and a few others created a variety of theories and the tools to prove them out. We will look at some of these tools and try to help you understand the rationale and usage of them in trading.
