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The problem with On Balance Volume is that it is based on assumptions that use an all or nothing approach.. The theory requires that volume on a down day be assumed to be all negative and vice versa. However, dissecting the trades during Friday's action(a down day), there were two phases. The morning's action started with heavy downside volume. During the afternoon, the stock moved up with heavy volume (large size transactions at the ask). Every time there was an uptick, the volume increased. Since the whole theory is based on "smart money" assumptions, there is an open question as to what the "smart money" was doing that day. Somebody was buying in spite of the presumptive bad news. Personally, I believe Friday morning's action was shorts, panic sellers and day traders. the afternoon brought out bargain hunters; basically, people who were looking to buy in on any weakness. Of course, daytraders were mixed into this group, as well. Institutions aren't doing much as pointed out by tmoney, but somebody knows something. That's what 'smart money" is. Remember, the selling was not based on "inside info", but a press release. The buyers were motivated by something else. |
