Here's a definition of the indicator. It can often indicate accumulation or selling by institutions and funds:
The On Balance Volume function determines the momentum of a financial data series using the trading volume to assess the significance of the direction of price changes.
Parameters ------------------ Close The closing price of the security for each given day. Volume The number of shares of the security that were traded during each given day.
Note that while this function is intended for use with these specific values, any values can be used for these parameters, including other price values and averaged prices.
Indicator Value ------------------------ The On Balance Volume is similar to the Price and Volume Trend and the Accumulation/Distrubution indicators. All of these indicators add or subtract some portion of the trading volume from a cumulative value based on the direction of price movement. When prices increase, the volume is added. When prices decrease, the volume is subtracted.
The On Balance Volume momentum indicator determines whether money is flowing into or out of a security. If the closing price increases from the previous day, all of the volume is considered to be up-volume. If the closing price decreases, the volume is considered down-volume. This directed volume is then added to the momentum from the previous day. This differs from the Price and Volume Trend and Accumulation/Distribution indicators which use only a portion of the volume depending on the size of the price change.
Since this is a cumulative indicator, the value at the beginning of the data series is zero and the value associated with each new day is added to the value of the previous day. Note that if the closing price is unchanged, the indicator will remain unchanged.
Usage ----------- This type of indicator is often significant when it diverges from the current price trend. For example, if prices are rising and the indicator is decreasing, the price will typically begin to decrease since they lack the volume support to maintain the current trend.
Source ------------ This indicator is based on an entry in "Technical Analysis From A To Z" by Steven B. Achelis. It was originally developed by Joe Granville and presented in his book "New Strategy of Daily Stock Market Timing for Maximum Profits".