On Balance Volume Divergence...thoughts?

Discussion in 'Technical Analysis' started by John47, May 15, 2005.

  1. John47


    Here's the ES weekly bar chart. The black study below is on balance volume showing a clear divergence. Below that is accumulation/distribution showing a divergence as well, albeit much lesser.

    Thoughts here?
  2. John47


    always forget to actually post the damn chart.
  3. I watch OBV all of the time, multiple time-frames. It's tricky.
    From your charts, I see DEC04 with nice price action, but WEAK OBV...i.e. up-volume not that strong.
    However, lastest action indicates strong buying interest as shown by uptrending OBV in face of sideways price action.
    If my analysis is correct, we're going north short-term.
  4. duard


    There is a big divergence in NDX v. SPX also.
  5. kowboy


    Please explain,

    But have I missed something? How do you interpret A/D and OBV in January-February 2003 when one should have bought at the low? Like how would these indicators have given you the signal to buy when the price was low?

    Could you explain what exactly is the divergence you are looking for and the theory behind a divergence signal?

    I've read tc2000 on OBV, but never understood its usefulness.

    Thanks for the explanation in advance.
  6. serg007


    When the price continues to fall (making new lower lows) while OBV starts to show higher lows that means more volume now is attributed to the upside. Or in other words, people sell less shares when the price falls and buy more shares when the price rises- hence, the bear is weakening and the bull is awaking :p
  7. I watched OBV 1 minute and 10 minute charts once in INTC while another trader was long in the stock. The price action was sideways, but the OBV was positively awful. He eventually closed that trade for a loss.
    I'm not espousing OBV as any Holy Grail, but it can be useful...at times.
  8. gnome


    My thoughts.... Forget about volume entirely; you'll trade better.
  9. I almost agree entirely. Volume is only a concern if you're trading illiquid markets- you don't want to move it.
  10. In truth, the only thing that really exists ARE divergences. Not only OBV but anything you want.

    The art consists in picking the ones that matter!
    #10     Jun 8, 2005