On Balance Volume at Trade10.com- The science of trading market momentum for stocks, options, futures and bonds.

Critical Day Analysis

Our critical day analysis is all about trend reversals. We tell you when there is a high potential for a reversal of the short trend and we've been doing it since 1994 with an 80%* accuracy.

Trade10 Home | Advertisement Opportunities | Recent Signals

Home

QuoteChart Opinion Profile

Enter Symbol:

WALK THROUGH A CRITICAL DAY

OUR SERVICE

MARKETS

UNDERSTAND THE CHARTS

JOIN!!!

On Balance Volume

Volume is the number of shares or contracts that change ownership over a given period of time. It is an indication of supply and demand that is independent from price and can relate a great deal about the relative enthusiasm of buyers and sellers in the market place. On Balance Volume is one indicator that is designed to track changes in volume over time. It is the running total of volume calculated in such a way as to add the day's volume to a cumulative total if the day's close was higher than the previous day's close and to subtract the day's volume from the cumulative total on down days. The assumption is that changes in volume will precede changes in price trend. On Balance Volume was created by Joseph Granville and has a number of interpretive qualities and should be used in conjunction with other indications of price trend reversals.

Another use of On Balance Volume (OBV) is to look at the trend in the indicator. A rising trend in the OBV gives sign of a healthy move into the security. A doubtful trend, or sideways trend in the OBV leaves price trend suspect and a candidate for a reversal of the trend. A falling OBV trend signals an exodus from the security despite price activity and leads to the caution that price may follow if it is not already. As indicated on the graphs above, look for divergences between the price and the OBV indicator. Divergences between the peaks warns of a potential fall in prices. Divergences between the troughs warns of a potential rise in prices.

To the right technical studies are examined in more detail to provide a sense of conformational evidence for traders of the critical day. Click on any of the terms to take a closer look at a technical discussion on that topic. All formations, patterns, indicators and technical tools fail at various times and so should only be used to build a body of evidence in forming a trading decision rather than being solely relied upon. There are a number of valuable studies that lead to intuitive understandings about price and volume but a strong compliment to technical analysis is an understanding of the trends and changes in the fundamentals and economic activity that ultimately lead valuation levels in the markets.

Walk through a critical day

The graphs show a price plot of the Dow Jones Industrials from Sept 28/00 to early November. The First graph ends on November 3/00, two days before an upcoming critical day on November 7/00. Our members looking at the market are expecting a trend reversal to occur due to the high rate of success in our research. Ideally a member will be using their own skills to judge the supply and demand changes, using technical and fundamental indications to confirm suspicions of a reversal, and trade accordingly.
On the second graph we see that the price action on November 6 was a bullish day, reversing the short trend so that the short trend leading into the critical day is now up. A critical day is an expectation of a reversal of the short trend that immediately precedes the critical day. In the case of the November 7 signal, given to members 3 days before, is an indication that the upward moving trend, recognized at the close of November 6 is expected to reverse direction.
On the third graph we can see that November 7 was a low volatility after a large gain on November 6 of about 160 points for the Dow Jones Industrials. The subsequent move over the three days following the November 7 signal saw the Dow Jones Industrials fall 376 points. The next day, November 13, the Dow Jones Industrials lost an additional 83 points with intra-day low a full 609 point loss since the open on the critical day.

Most recent signals

A closer view of the most recent signals. You can see the short trend immediately prior to a successful critical day, reverses coming away from the critical day. Often a failed critical day will indicate a stronger bias in the market for continuation of the trend that was in place prior to the critical day. A failed signal can therefore provide as much information and opportunity as a successful one. Take a look at tech studies to develop a sense of trend reversals and use.

Tech Studies

Comparative Relative Strength

Congestion Pattern

Consolidation