OBV (On Balance Volume) analysis is one of the most fascinating technical studies, because it generally LEADS price. (There are times when it lags, but no time to write a discussion of that for now). It is often an excellent way to ENTER A POSITION EARLY, near the "top" or "bottom" (though we don't try to call tops / bottoms, that being risky, falling knife, etc).
Unlike Moving Averages and other tech studies, OBV often LEADS price and is an excellent predictor (moving averages always lag price).
I use Money Flow, Acc/Dist, etc in addition to OBV (On Balance Volume), but OBV is the easiest to use for the purpose below.
Note that everytime (or most everytime) that a horizontal support level, or an angled trendline level was violated, that price followed, usually within hours. This is a 60 minute chart, not a daily chart, so the correlation is weaker. That is, the move down would be more if this were on a daily chart. But this does suggest at least a pullback, it's too early to tell whether it's big or small.
On the chart, the black line is OBV, the blue lines are horizontal support / resist OR a trendline. The Red/Green lines show the price when the blue line is violated by OBV.
* ChristopherStockGuy is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. For details, see the post from SATURDAY, AUGUST 15, 2009 titled "Disclaimer".
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