Flags/Pennants

Unfortunately OBV assumes if today's close was lower than yesterday's then the volume was selling and vice versa.  That alone is too crude a measure.

Price is moved by the eagerness of those two parties rather than simply 'more sellers or buyers'. Of course ones eagerness can be affected by weight of numbers but many other factors can affect eagerness too.  Its a subtle but important distinction.  We make money by working out which side is most eager and joining them.  Reading the bar, not just the close, is one step in that process.

In addition, large volume on an up day doesn't in itself mean professionals getting into the market, it could also be professionals exiting the market or 'frenzied public activity' or both.  Its all about context, understand how the professional works and you can see his footprints and read their intentions.

I'm not suggesting OBV is useless, just that it is no substitute to understanding the relationship between price action and volume in deciding what the 'professionals' are doing.

ITT.

Edited by IT-Trader

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IT-Trader Members Profile Send Private Message Find Members Posts Add to Buddy List Regular Joined: 10 Nov 2005 Posts: 23	Post Options Post Reply Quote IT-Trader Report Post Quote Reply Topic: Flags/Pennants Posted: 07 Mar 2008 at 2:11am
	Unfortunately OBV assumes if today's close was lower than yesterday's then the volume was selling and vice versa. That alone is too crude a measure. Price is moved by the eagerness of those two parties rather than simply 'more sellers or buyers'. Of course ones eagerness can be affected by weight of numbers but many other factors can affect eagerness too. Its a subtle but important distinction. We make money by working out which side is most eager and joining them. Reading the bar, not just the close, is one step in that process. In addition, large volume on an up day doesn't in itself mean professionals getting into the market, it could also be professionals exiting the market or 'frenzied public activity' or both. Its all about context, understand how the professional works and you can see his footprints and read their intentions. I'm not suggesting OBV is useless, just that it is no substitute to understanding the relationship between price action and volume in deciding what the 'professionals' are doing. ITT. Edited by IT-Trader

maximo Members Profile Send Private Message Find Members Posts Add to Buddy List BullCharts Guru Joined: 02 Sep 2006 Location: Australia Posts: 232	Post Options Post Reply Quote maximo Report Post Quote Reply Posted: 04 Mar 2008 at 1:25am
	Not aware of any built in ones that do this however.. Flags and Pennants are formed from a large price spike and I made an indicator which would pick them up from the earliest stage of formation ie. the pole for these patterns. Scan parameter >1.25 (C/100)/ma(C/100,21,S); Formula can also be used to detect volume spikes for professional buying or selling. Selling is confirmed by the direction of the OBV being down. Buying is confirmed from the direction of OBV being up. Scan parameter >3.0 (V/100)/ma(V/100,21,S);

thegrid Members Profile Send Private Message Find Members Posts Add to Buddy List Newbie Joined: 10 Feb 2008 Location: Australia Posts: 5	Post Options Post Reply Quote thegrid Report Post Quote Reply Posted: 22 Feb 2008 at 9:56am
	An example flag or pennant in the last couple of days is NDO. Is there a scan that catches this?