Stock Charting: On Balance Volume

On Balance Volume

On Balance Volume shows total money flow in or out of the security. The logic behind this indicator is that when additional money flow into the security this will generate a positive change in price. Similar when the security is being sold, the money flow in the security is negative and this may generate a negative price move.

When On Balance Volume in in an upward trend it basically shows that the stock has being bought, when On Balance Volume is in a downward trend it shows that the stock is being sold. A confirmed change in On Balance Volume from a downward direction into an upward can be considered as a long term buy signal, similar a change from an upward trend into a downward can be though of as a sell signal (see red lines on the chart) OBV is in a rising trend when each new high is higher than the previous one and each new low is higher than the previous one
OBV is in a downward trend when each hew high is lower than the previous high and each new low is lower than a previous one.

On Balance Volume is calculated using the following formulae:

For the first data point OBV is equal to zero, then OBV is consecutively added to the previous function value.

MA CVX MRK LLY ABBV BAC PFE AVGO PEP KO TMO COST DIS WMT CSCO MCD