First, those who do not believe in technicals, don't berate
me. I find them helpful in choosing entry and exit points
and marking short term trends. Others don't. I know that.
It's an old debate.
OBV is the on balance volume. You start out with a set
number--can be zero. You then subtract the end of day volume for any day that the price is below that to the
previous day. You add the volume of any day where the price
is up. The total stock traded is, of course, zero-zero
because there is always a buyer and a seller but by adding
the volumes on a final tick up or subtracting on a tick
down, you can see a trend being established. For example,
you may have a down day with 10,000 shares but an up day
with 100,000 shares. Have that happen a few times and you
know that the asks are being hit. This trend shows more
clearly (in my opinion)than the moving average (MA). The
MA may be trending down (price moving down on a series of
given days)but the OBV may be moving up because of volume
on up days. Take a look at a chart for TWG. If I'd have
been paying attention, the OBV should have got me in around
44 cents. One thing that concerned me about the TWG chart
was that the volume (not the OBV) bars were trending down
while price was trending up. That often indicates latecomers
(like myself) jumping in after the real interest has peaked.
It often means that the price will start to break down from
a top. However, the volume started up again, in concert with the price so I figured it was worth taking a position.
Buying signs: volume up, price up.
Warning signs: volume down, price up. volume up, price down.
And the granddaddy of them all. Volume down, price down. |
