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On Balance Volume OBV

Technical Indicator

The concept behind the indicator: volume precedes price. OBV is a simple indicator that adds a period's volume when the close is up and subtracts the period's volume when the close is down.

A cumulative total of the volume additions and subtractions forms the OBV line. This line can then be compared with the price chart of the underlying security to look for divergences or confirmation.

A rising volume can indicate the presence of smart money flowing into a security.

A rising (bullish) OBV line indicates that the volume is heavier on up days. If the price is likewise rising, then the OBV can serve as a confirmation of the price uptrend. In such a case, the rising price is the result of an increased demand for the security, which is a requirement of a healthy uptrend.

If prices are moving higher while the volume line is dropping, a negative divergence is present. This divergence suggests that the uptrend is not healthy and should be taken as a warning signal that the trend will not persist.



   
     

On Balance Volume OBV

Technical Indicator

The concept behind the indicator: volume precedes price. OBV is a simple indicator that adds a period's volume when the close is up and subtracts the period's volume when the close is down.

A cumulative total of the volume additions and subtractions forms the OBV line. This line can then be compared with the price chart of the underlying security to look for divergences or confirmation.

A rising volume can indicate the presence of smart money flowing into a security.

A rising (bullish) OBV line indicates that the volume is heavier on up days. If the price is likewise rising, then the OBV can serve as a confirmation of the price uptrend. In such a case, the rising price is the result of an increased demand for the security, which is a requirement of a healthy uptrend.

If prices are moving higher while the volume line is dropping, a negative divergence is present. This divergence suggests that the uptrend is not healthy and should be taken as a warning signal that the trend will not persist.



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