On Balance Volume (OBV)

On-balance volume assigns the whole bar's volume to the side of the close. A day that closes up adds every share traded that day to the cumulative line, including shares that traded on the way down. That is a rough model of accumulation, not a measurement of buyers versus sellers. The level of the OBV line is arbitrary because it depends on where you started the sum. The shape is what matters.

A rising OBV says recent up days have been the heavier days. A falling OBV says the down days have been heavier. The classic use is divergence: price makes a new high while OBV does not, which says the up days are no longer the heavy ones. Divergence is a warning. Granville treated a break in the OBV line as able to lead price. Sometimes the line leads. Often it is just restating the closes you already see, because the sign is the close.

OBV holding a rising sequence of lows while price pulls back says the down days inside the pullback were lighter than the up days before it. An OBV breakout to a new high ahead of price is the bullish divergence version. Confirm with the price level before you treat the line as a trade.

OBV failing at a high while price pushes on, or OBV breaking its own support, is the bearish read. A single down day on huge volume can break OBV even if the trend is fine. Look at the bar that caused the break.

Reading the absolute OBV number as comparable across stocks. It is a cumulative sum from an arbitrary start. Also assuming a flat close day had no information. Unchanged-close days are ignored even if the range and the volume were large.

The whole bar is labelled by the close. A bar that rallies all morning and sells off to close one tick up still adds all of its volume. Finer tools use the close location or the bid-ask delta. OBV will not see that. And gaps: a stock can gap up on tiny volume and still add only that tiny volume, so OBV understates gap events.