ELLIOTT WAVE

A flat correction differs from a zigzag in that the subwave sequence is 3-3-5, as shown in Figures 1 and 2. Since the first actionary wave,

Fibonacci studies: arcs, fans, retracements, and time

Overview: Leonardo Fibonacci was a mathematician who was born in Italy around the year 1170. It is believed that Mr. Fibonacci discovered..

Indicator

The Negative Volume Index (“NVI”) focuses on days where the volume decreases from the previous day. The premise being that the “smart money” takes positions on days when volume decreases

Basic Technicals

MACD technical analysis MACD technical analysis stands for moving average convergence/divergence analysis of stocks.

Fundamental Analysis

Doubling Stocks Review: Is this a scam? If you are looking for the truth about doubling stocks this is a necessity. One always thought there was something wrong with a doubling of stocks.

Monday, June 7, 2010

On Balance Volume

Overview
On Balance Volume (“OBV”) is a momentum indicator that relates volume to price change.On Balance Volume was developed by Joe Granville and originally presented in his book New Strategy of Daily Stock Market Timing for Maximum Profits.
Interpretation
On Balance Volume is a running total of volume. It shows if volume is flowing into or out of a security. When the security
closes higher than the previous close, all of the day’s volume is considered up-volume. When the security closes lower than
the previous close, all of the day’s volume is considered down-volume.
A full explanation of OBV is beyond the scope of this book. If you would like further information on OBV analysis, I recommend that you read Granville’s book, New Strategy of Daily Stock Market Timing for Maximum Profits.
The basic assumption, regarding OBV analysis, is that OBV changes precede price changes. The theory is that smart
money can be seen flowing into the security by a rising OBV. When the public then moves into the security, both the security
and the OBV will surge ahead.
If the security’s price movement precedes OBV movement, a “non-confirmation” has occurred. Non-confirma-tions can occur
at bull market tops (when the security rises without, or before, the OBV) or at bear market bottoms (when the security falls
without, or before, the OBV).The OBV is in a rising trend when each new peak is higher than the previous peak and each new trough is higher than the previous trough. Likewise, the OBV is in a falling trend when each successive peak is lower than the previous peak and each successive trough is lower than the previous trough. When the OBV is moving sideways and is not making successive highs and lows, it is in a doubtful trend. \[See Figure 1]
Once a trend is established, it remains in force until it is broken. There are two ways in which the OBV trend can be broken. The first occurs when the trend changes from a rising
trend to a falling trend, or from a falling trend to a rising trend.The second way the OBV trend can be broken is if the trend
changes to a doubtful trend and remains doubtful for more than three days. Thus, if the security changes from a rising trend to a doubtful trend and remains doubtful for only two days before
changing back to a rising trend, the OBV is consid-ered to have always been in a rising trend.
When the OBV changes to a rising or falling trend, a “breakout” has occurred. Since OBV breakouts normally precede price
breakouts, investors should buy long on OBV upside breakouts. Likewise, investors should sell short when the OBV
makes a downside breakout. Positions should be held until the trend changes (as explain-ed in the preceding paragraph).
This method of analyzing On Balance Volume is designed for trading short-term cycles. According to Granville, investors
must act quickly and decisively if they wish to profit from short-term OBV analysis.
Example
The following chart shows Pepsi and the On Balance Volume indicator. I have labeled the OBV Up, Down, and Doubtful
trends.

A falling trend, as you will recall, is defined by lower peaks and lower troughs. Conversely, a rising trend is defined by higher peaks and higher troughs.
Calculation
On Balance Volume is calculated by adding the day’s volume to a cumulative total when the security’s price closes up, and
subtracting the day’s volume when the security’s price closes down.If today’s close is greater than yesterday’s close then:
If today’s close is greater than yesterday’s close then:
If today’s close is less than yesterday’s close then:
Courtesy Copyright Technical Analysis from A to Z .This content copyrights protected  Written by Steven B. Achelis.

Odd Lot Balance Index

Overview
The Odd Lot Balance Index (“OLBI”) is a market sentiment indicator that shows the ratio of odd lot sales to purchases (an
“odd lot” is a stock transaction of less than 100 shares). The assumption is that the “odd lotters,” the market’s smallest
traders, don’t know what they are doing.(Unfortunately, the trading of 99 share lots in an effort to skirt the “up-tick” rule, which requires that specialists take short positions only when prices move upward, has rendered odd lot
indicators less reliable.)
Interpretation
When the Odd Lot Balance Index is high, odd lotters are selling more than they are buying and are therefore bearish on the
market. To trade contrarily to the odd lotters, you should buy when they are selling (as indicated by a high OLBI) and sell
when the odd lotters are bullish and buying (as indicated by a low OLBI).You can smooth day-to-day fluctuations of the Odd Lot Balance Index by plotting a 10-day moving average of the Index.
Example
The following chart shows the S&P 500 and a 10-day moving average of the Odd Lot Balance Index.
I drew a vertical line when the odd lotters were excessively pessimistic–which turned out to be a good time to buy.
Calculation

Courtesy Copyright Technical Analysis from A to Z .This content copyrights protected  Written by Steven B. Achelis.