24 basic indicators (14)-OBV

OBV indicator analysis and determination

The OBV index, also known as the energy tide index, is created by US stock market analyst glambi and is a short-term technical analysis tool that focuses on stock market transaction volume determination.

Section 1 principle and Calculation Method of OBV indicators

I. Principle of OBV indicators

The energy tide OBV index was proposed by GE lanbi in the 1960s s and is widely used. Four factors of stock market Technical Analysis: Price, volume, time, and null. The OBV index is a technical indicator used to discover hot stocks and analyze the stock price movement trend from the "quantity" factor as a breakthrough. It digitizes and visualizes the relationship between the stock price and the stock price, and measures the driving force of the stock market based on the changes in the stock market volume to determine the stock price trend. The OBV energy tide index is one of the most important analysis indicators.
The OBV indicator consists of the OBV value and the OBV line. The OBV line method is another major contribution of greenbi. He extended the concept of "average volume" and thought that transaction volume is the currency of the stock market. The stock price is just a manifestation of it. Therefore, the transaction volume is generally higher than the stock price. This theory of "first view, then view" has long been proved by the stock market.

The basis for the establishment of the Energy tide theory is:
1. The more inconsistent the investor's comments on the stock price, the larger the transaction volume. On the contrary, the smaller the transaction volume. Therefore, the transaction volume can be used to determine the popularity of the market and the strength of both sides.
2. Gravity principle. The rising objects will fall sooner or later, and the rising objects require more energy than the falling ones. When it comes to the stock market, it can be interpreted as: on the one hand, the stock price will fall sooner or later; on the other hand, the energy required for the stock price to rise is large, so the rise of the stock price, especially in the early stages of the Rise, must have a large transaction volume; when the stock price falls, there is no need to spend a lot of energy, so the transaction volume is not necessarily enlarged, and there is even a tendency to shrink.
3. Inertia principle-constant motion and static motion. Only hot stocks that have been investors or the main partner will fluctuate in a large period of time, while cold stocks that have no one cares about will be within a period of time, both transaction volume and stock price volatility are relatively small.

Ii. OBV Value Calculation Method

OBV indicators are easy to calculate, mainly by calculating the cumulative transaction volume.
The calculation formula is as follows:
Today's OBV = today's value + the previous day's OBV Value
If the current day's closing price or index is higher than the previous day's closing price or index, the current day's value is positive. If the current day's closing price or index is lower than the previous day's closing price, the current day's value is negative; if the current day value is the same as the previous day's closing price or index, the current day value is not calculated, and then the accumulated transaction volume is calculated. Here, the transaction volume refers to the number of stocks sold.
Similar to the calculation of other indicators, the selected calculation cycle is different, OBV indicators include daily OBV indicators, weekly OBV indicators, yearly OBV indicators of monthly OBV indicators, and minute-level OBV indicators. The daily and weekly OBV indicators are often used for stock market research and determination. Although their values are different during calculation, the basic calculation method is the same. In addition, with the development of software analysis technology in the stock market, investors only need to master the basic principles and calculation methods of OBV formation, and do not need to calculate the index value, more importantly, we use the OBV index to analyze and determine stock quotations.
The calculation method of the OBV value of the stock index is as follows:
The closing index on the current day is more than the previous day's trading volume (hand stock) cumulative OBV
1 1000 +
2 1050 + + 3000 + 3000
3 1025--1500 + 1500
4 1000--1000 + 500
5 1030 + + 2000 + 2500
1070 + + 3000 + 5500
The calculation method of the OBV value of a single stock price is as follows:
The closing price of the date is more than the previous day's increase/decrease volume (hand stock) cumulative OBV
1 18.80 ---
2 19.20 + + 3000 + 3000
3 19.40 + + 2500 + 5500
4 19.10--700 + 4800
5 19.00--800 + 4000
19.50 + + 2000 + 6000
The OBV line draws the OBV value on the coordinate chart, uses the time as the abscissa, and the transaction volume as the ordinate. It marks the position of the calculated OBV value on the coordinate line on each day and connects it to the OBV line.

Section 2 General Evaluation Criteria for OBV indicators

1. When the OBV line drops while the stock price rises, it indicates that the stock price may fall at any time due to insufficient energy. This is a signal to sell the stock.
2. When the OBV line rises and the share price drops slightly, it indicates that the market is very popular and the next shift is strong. The decline in the share price is only a temporary technical callback, and the share price may stop falling.
3. When the OBV line slowly rises and the stock price also rises, it indicates that the market is steadily rising, the medium-and long-term investment in the stock market is still good, and there is still room for the stock price to rise. Investors should hold their shares to rise.
4. When the OBV line slowly drops and the share price also drops, it indicates that the market is gradually falling. The stock market's medium-and long-term investment situation is poor, and there is still room for the share price to fall, investors should focus on selling shares or holding currency.
5. Generally, when the OBV line is experiencing a rapid increase, it indicates that most of the purchases on the market have been in full swing, and the buyer's energy cannot last long, there may be a rollback in the market, and investors should consider selling at a high price. Especially shortly after the sharp rise of the OBV line, and the saw-tooth curve on the disk surface and signs of turning down, it indicates that the market has risen weak, the market is about to turn around, for the more obvious sales signal. This is more accurate for the analysis and determination of stocks that have rapidly increased and increased in the short term.
6. In general, when the OBV line experiences a sharp decline, it indicates that a large number of disks are sold in the market and the stock market has become a decline, the row price will enter a long period of decline, at this time, investors should still hold the currency wait-and-see, do not easily rebound. Only when the OBV line experiences a sharp drop and starts to form a jagged curve in the lower part can the OBV line be considered to be involved for a short-term rebound.
7. The high point (that is, the accumulated high point) of the large band after long-term accumulation of the OBV line often becomes a major resistance area for the market to rise again, share prices often fall in the vicinity of this region due to a strong upward pressure. However, once the stock price breaks through this long-term resistance zone, the subsequent rise will be more powerful.
8. After the long-term accumulation of the OBV line, the high-band low point (that is, the accumulation low point) will usually form a large support area with a falling market, the stock price will experience a strong decline in support in the vicinity of this region and stop falling to stabilize. Once the share price falls below this long-term support zone, its subsequent decline will be more severe.

Section 3 Special Analysis Methods of OBV indicators

I. Best applicability of OBV indicators

1. The OBV index has a unique advantage for the research and determination of the next new stock that fell along the way from the date of listing within two years. In this case, investors will pay more attention to the new stock market in the future.
2. The OBV index has no substantial reference significance for the analysis and determination of stocks that have been listed for more than two years and have been greatly hyped in the Early Stage

Ii. Positive and Negative conversion of the OBV value (or line)

When the stock market is organized, the change direction of the OBV value (or line) is an important reference indicator.

1. When the OBV line changes from a negative accumulation value to a positive value, it is an important utilization point for OBV to judge the market.
(1) For the next new shares that have been listed for two years and have been listed for a decline since then. After a period of decline in a listed stock, its OBV line (or value) will become negative, and the longer the decline, the larger the amplitude, the negative value is larger. After a period of slight increase, when the negative value gradually decreases and moves closer to zero, it indicates that the buyer's strength is getting stronger and stronger, and once the OBV line changes from a negative accumulation value to a positive value, on behalf of the buyer, he began to grasp the direction of the stock market and has achieved a decisive advantage. The stock price may have a long-term upward trend from now on, which is the best long-term buying signal.
(2) Secondary new shares that have been listed for two years but the stock price has fallen back to its historical low position (or a new low) after significant speculation in the early stage. If the OBV line changes from a negative accumulation value to a positive value, it only means that both sides have achieved a balance temporarily, and the future direction of the stock price is unclear. Investors can make short-term purchases, wait for the stock price to rebound, or hold the currency to wait for the development of the market.
(3) the next new share with a small increase in share price within two years. If the OBV line changes from negative accumulation to positive value, it means that after a long competition between the two sides, multiple parties gradually take advantage of the situation. Investors can start creating short-term warehouses. Once the stock price rises again, the OBV line also began to rise rapidly from below the negative value, which is a signal to the midline purchase. Investors can buy stocks in time and hold shares to rise.
(4) If the stock price has been on the market for more than two years, and after the stock price has been greatly hyped in the early stage, the stock price will return to the historical low position or the low innovation level after the stock is revoked, the stock price is still relatively high in history. Even if the OBV line changes to a negative value and then changes from a negative value to a positive value, the OBV index is no longer applicable to the analysis and determination function. Investors should select other indicators to study and determine the OBV index.
(5) The OBV evaluation function is not applicable to stocks that have risen as soon as they are listed, but whose share prices have not fallen sharply or have been listed for more than two years.

2. When the OBV line changes from positive accumulation value to negative value, it is also an important utilization point for OBV to judge the market.
(4) For a stock that has been on the market for more than two years and has not been heavily hyped, the stock price will return to its historical low position or low innovation after the stock is revoked. If the OBV line changes from positive to negative, the OBV index is no longer used for analysis and determination from negative to positive. Investors should also select other indicators for analysis and determination.
(5) The OBV evaluation function is not applicable to stocks that have risen as soon as they are listed, but whose share prices have not fallen sharply or have been listed for more than two years.

Iii. Deviation and morphological features of the OBV Curve

1. The deviation between the OBV line and the stock price is also an important reference for judging whether the stock market has changed.
(1) If the stock price continues to rise after a large increase in the previous period, but the OBV line begins to turn around and down, it indicates that the stock price is weak in buying high-end disks, which is a signal of short-term sales.
(2) If the stock price continues to decline after a large decline in the previous period, but the OBV line has begun to turn around, it indicates that the stock is more active in buying disks at a low price, and the buyer's strength has begun to increase, it is a short-term purchase signal.

2. Relationship between the OBV line and m head, W bottom, triple top, and triple bottom of Stock Price
(1) When the stock price fluctuates in the form of M heads (or top three), The OBV line will send a strong warning signal. When the stock price reaches a slight consolidation near the top of the early stage after a period of adjustment, and the OBV line is also unable to rise, the transaction volume shrinks, at this time, the stock price is easy to fall again to form a m head, at this time, investors should be vigilant. If the OBV line and the stock price form a triplicate form almost at the same time, we should sell stocks in a short time.
(2) When the stock price fluctuations may form a bottom W (or a bottom with three duplicates), The OBV line will also send a strong warning signal. When the stock price form is about to form a bottom W, if the corresponding OBV line leads up first and the transaction volume increases, it is a signal that the stock price may bottom out in the short term. If the OBV line and the stock price form almost simultaneously form a triple base, the bottom feature of the stock price stage will be more obvious.

Iv. Limitations of OBV indicators

The OBV index is calculated based on the accumulated transaction volume. Therefore, for long term evaluation indicators such as weekly OBV index and monthly OBV index, in practice, the analysis and determination function is lost, which is essentially different from other technical analysis indicators. Investors should pay attention to this in their actual operations, and use weekly OBV and monthly OBV indicators as few as possible to judge the market, so as to avoid misjudgment.
Similarly, the OBV indicator does not have the original parameter value. It cannot evaluate the quote in multiple directions from different angles and cycles based on the modified parameter value. Therefore, the OBV Index analysis method is relatively simple, and the analysis and determination functions are relatively simple.
In addition, the OBV index calculation principle is too simple, and in the OBV value calculation formula, only the rise and fall of the closing price is used as the basis, there is distortion, the applicability of OBV indicators is limited to short-term operations and cannot be used for the analysis and determination of long-term investment.
Advantages of OBV indicators
The OBV index is suitable for short-term investment decision-making and is an important Analysis Method for Predicting short-term fluctuations in stock prices. It helps investors determine the development trend after the stock price breaks through the board.
An important function of the OBV indicator is to display the trend of the main funds in the market. Although the OBV index cannot be used to propose a reason for moving funds, when the sudden increase or decrease in transaction volume falls into a low price or high price circle, investors can be reminded to pay attention to changes in transaction volume, in this way, we can determine the market trend in advance.

Section 4 practical skills of OBV indicators

Compared with other indicators, the OBV index should be used for new shares that have been listed for two years and have been declining since the listing, the practical skills of OBV indicators mainly focus on the shape and Operation direction of the OBV curve. Next we will use the OBV indicators on analytics software to reveal their trading and wait-and-see functions. (Note: In most stock market software, the OBV indicator parameters are fixed ).

I. Sales Functions

1. When the OBV curve runs horizontally at a certain horizontal position for a long period of time, once the OBV curve quickly runs upwards and breaks through the previous platform, and the stock price also breaks through the medium-and long-term average, it indicates that the multi-headed forces are beginning to take advantage of this advantage, and the stock price will rise rapidly with the cooperation of a large amount of energy, which is a signal to buy the OBV indicator. (23-1.
2. When the OBV curve rapidly rises to a certain high level, if the OBV curve declines rapidly and the stock price breaks down over the medium-and long-term average, it indicates that the stock price increase can be released too quickly in the short term, the short position starts to take an advantage and the stock price will fall in the short term. This is a sell signal of the OBV indicator. (23-2.

Ii. Currency Ownership Function

1. When the OBV curve runs horizontally at a certain horizontal position for a long time, once the OBV curve runs up quickly and the stock price also rises upwards based on the medium-and short-term moving average, this shows that the multi-headed force has a significant advantage and the stock price will continue to rise. This is a signal that the OBV index holds shares to rise. (23-3.
2. When the OBV curve rapidly rises to a certain high level, if the OBV curve rapidly declines and falls below the platform in the near future, and the stock price is also lowered by the medium-and short-term moving average, it indicates that the short position has a significant advantage and the stock price will fall in the short term. This is the currency holding signal of the OBV indicator.