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Trade the Bollonger Band Squeeze

OBV as a signal.

Chart Forum » Does Technical Analysis Really Work? » OBV as a signal.

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hershy
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Username: hershy

Post Number: 1722
Registered: 10-2002

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Wednesday, November 29, 2006 - 05:44 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I have been looking for examples to back this up but they are hard to come by. In theory it should be more evident but in practice, well, that's another story.
When share prices go up so does volume and vice versa. This is fairly well accepted and it is the case much more often than not. So the "smart money" that "knows something" the rest of us don't, cannot hide when being contrary. Unlike market depth which can and is manipulated shamelessly, OBV cannot be . Buying when all around are selling can be camouflaged by spacing out the purchases over an extended period but cannot be hidden. So the theory says that when prices are going down and the volume is increasing visibly, someone is buying forcefully and an increasing OBV diverging from the decreasing price line is a buy signal. The opposite is then true when prices move up but volume is going the other way. It can be argued that the divergence can be against a steady price line as seems to be the case in the chart below. It is obvious NOW when looking at the chart that somebody knew something the punters did not and was drip feeding shares into a range bound market in anticipation of an expected fall. Which ensued in due course. The chart is Baycorp and the signal is NOT because of the crossover but because of the divergence. Disregard the ATR line, it has no relevance in this case study.
I would appreciate further examples being posted in this thread.




I don't have a plan so nothing can go wrong !!!

http://members.optusnet.com.au/~hershy/

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macca888
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Username: macca888

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Wednesday, November 29, 2006 - 08:32 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



G'day hershy

This little black duck may have had a name change to Veda Advantage limited (VEA) on 3-11-06. That's the plateau on the right of your Close line.
Check out http://www.delisted.com.au
I kept punching in BCA into the Search for Security Name before dinner and came up with zip.
This may explain the lack of replies.
I understand your hypothesis but have insufficient knowledge of OBV to make an intelligent comment.
I try to keep my analysis as close as possible to raw price, volume and time.

regards
macca888







"Buy low, sell high is a cliche, not a blueprint for action. It blinds investors to the professionals' approach of buying high and selling higher." Stan Weinstein

"A prudent speculator never argues with the tape. Markets are never wrong - opinions often are". Jesse Livermore

"The only sound reason for buying a stock is that it is rising in price.
If that is happening, no other reason is required.
If that is not happening, no other reason is worth considering".Nicolas Darvas


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msparks
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Wednesday, November 29, 2006 - 10:22 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Not sure why you are looking at this one Hershy.
I have had PSV , OBV and TMF all on the same project and decided to go with the TMF for divergence but a large volume candle with a tail on top, sort of throws TMF off the scent a little, even if it is gapped higher.

Baycorp is VEA now



In a large ranging downtrend



Example of TMF behaving badly perhaps.



OBV went the right way in this example




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hershy
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Thursday, November 30, 2006 - 06:17 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hello Sparks and Macca,
The company is incidental, it's the signal I was enthused about - even though I cannot seem to make it work. I came across and old Larry Williams book where he writes of looking for divergence between the price action and the Accumulation/Distribution line and was attempting to put this to the test. My program's A/D line seems non standard and is unusable for this purpose and thought OBV might do a similar job.
It appears I may have been wrong in this assumption.
I should have remembered that when I assume, I make an ass of you and me !

(Message edited by Hershy on November 30, 2006)


I don't have a plan so nothing can go wrong !!!

http://members.optusnet.com.au/~hershy/

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hershy
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Saturday, December 09, 2006 - 09:51 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Here is a divergence between a line chart and accumulation/distribution line. I did not find this, it is from a free trial of the Bulls and Bears report which I believe can still be applied for at.

http://www.bbreport.com.au/members.php?pi=3



The reports that I have seen look very interesting.
I wonder what these guys have for lunch as they are only a few doors from The Daily Planet.


I don't have a plan so nothing can go wrong !!!

http://members.optusnet.com.au/~hershy/

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msparks
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Sunday, December 10, 2006 - 02:05 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Hershy
I cannot see the divergence you are referring to unless it is the horizontal accumulation versus the decline in price RHS of the chart ?

+++ png +++ 968892 +++ +++

(Message edited by msparks on December 10, 2006)


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msparks
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hershy
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Sunday, December 10, 2006 - 05:59 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



You got it Sparks.


I don't have a plan so nothing can go wrong !!!

http://members.optusnet.com.au/~hershy/

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des2
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Monday, June 11, 2007 - 10:16 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



im resurrecting this thread as theres a crucial unanswered question that i was hoping to get some help with.

the fact that the obv and tmf were not in accord with fat was highlighted by mssparks. it encouraged me to check up on a few of my charts.

it now seems to me that there is a deeper technical difference in the construction of these two indicators that cause them to consistently give contradictory signals. this is alarming only because the trading advise is identical in each case (which therefore seems to me to invalidate one of the two)

a recent example is lynas corporation lyc, which saw an enormous volume of 25 million traded with a bearish looking reverse hammer type of candle.

just to be clear let me state the obvious here : rising obv confirms an upward breakout; rising tmf (or cmf) above zero confirms an upward breakout (and vice versa in each case)



tmf




obv

these cases of contradictory signals seem to me commonplace and i have stopped using tmf for the time being. of course, an easy test of the indicators will be by watching to see how lynas reacts - in hindsight one will be confirmed and the other invalidated.

am i missing something here?


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msparks
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Tuesday, June 12, 2007 - 10:23 am:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Des
I agree totally with your observation.
Twiggy seems to fall down when unususal large volume occurs.
Probably better to use both, if volume is not consistantly within a normal range.

I think Colin should comment on this.
Here is my observation earlier in the thread.
http://www.incrediblecharts.com/userscripts/forums/show.plx?tpc=191443&post=1029 29#POST102929







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colin_twiggs
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Username: colin_twiggs

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Tuesday, June 12, 2007 - 02:00 pm:Copy highlighted text to 'New Message' boxEdit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Des,
OBV compares Closing Price to the previous Close while Twiggs Money Flow and Accumulation Distribution compare Closing Price to the daily range - consistent with the gravestone (or reverse hammer) which is a bear signal.

The LYC example exposes a weakness in all 3 indicators - volume spikes are often due to large institutional crossings which have little or no influence on actual market activity as they are only booked after the event.

Regards,
Colin

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