OBV....My understanding of OBV (On Balance Volume).
The s/p has held the trading range for a number of weeks closing almost daily at .0004 and then the weeks of closing at .0003. When there's no + or - closing price movement to factor into the volume the OBV flat lines.
The volume is still holding. I had also noticed the WM on today's chart finally made a bit of a move. The CMF and the Accumulation/Distribution is positive.
OBV is one of the indicators I look at when I'm considering buying a stock for (hopefully) a quick flip because of the volume precedes price theory.
Later tonight or tomorrow I will copy and post for you stockcharts explanation of OBV. I'm certain it will be better than my explanation.
I was only able to watch about the last 20 minutes of trading today. I don't know where the buying is coming from....but I just don't think very much of it is "retail" of late...and I don't think the MMs are just trading shares back-and-forth everyday. I've read this thought by some posters.
I do think MMs do this at times with stocks, but I just don't think it would happen all day every day like we see so much of with CMKX.....unless the MMs just do this because they have nothing better to do.
The trading on CMKX is a hard one for me to figure...that's for sure.
I'm ready for good news and a break to the upside out of the trading range rut we're in! (I'm thinking positive ;)
Joe Granville introduced the On Balance Volume (OBV) indicator in his 1963 book, Granville's New Key to Stock Market Profits. This was one of the first and most popular indicators to measure positive and negative volume flow. 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.
Calculation....
As stated above, OBV is calculated by adding the day's volume to a running cumulative total when the security's price closes up, and subtracts the volume when it closes down.
For example, if today the closing price is greater than yesterday's closing price, then the new
OBV = Yesterday's OBV + Today's Volume
If today the closing price is less than yesterday's closing price, then the new
OBV = Yesterday's OBV - Today's Volume
If today the closing price is equal to yesterday's closing price, then the new
OBV = Yesterday's OBV
Use....
The idea behind the OBV indicator is that changes in the OBV will precede price changes. A rising volume can indicate the presence of smart money flowing into a security. Then once the public follows suit, the security's price will likewise rise.
Like other indicators, the OBV indicator will take a direction. 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.
However, 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.
The numerical value of OBV is not important, but rather the direction of the line. A user should concentrate on the OBV trend and its relationship with the security's price.
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