Hello dear friends of @Project.HOPE, continuing with my posts on technical analysis, today I will share information on trend breakout confirmation signals using the on-balance volume indicator, any concerns please leave me your comments.
The price action usually generates ranges either of accumulation or distribution that create upper zones known as resistances, and lower zones or supports. However, the volume on balance indicator has the technical potential to confirm when resistances or supports are broken, as explained below.
Confirmation of breakouts in a bullish direction
The easiest way to effectively determine confirmation of a breakout in a bullish direction is when the on-balance volume indicator after remaining in a sideways zone, the line begins an upward movement that correlates with an upward increase in price action.
To exemplify how to confirm a breakout in an uptrend using the on-balance volume indicator, look at the following chart of the price action of the KAVA/USDT pair, note how the breakout of the on-balance volume indicator correlates with a breakout of resistance, behavior that confirms the breakout in an uptrend direction.
Confirmation of breakouts in a downward direction
Now, one way to effectively determine the confirmation of a breakout in a bearish direction using the volume on balance indicator, is when we observe that the price action after remaining in a sideways range, the price begins to depreciate and breaks the support in a bearish projection, and the volume on balance indicator accompanies the breakout with downward movements, this behavior confirms the breakout in a bullish direction.
To exemplify the confirmation of a breakout in a bearish direction using the on-balance volume indicator, note in the following chart the price action of the BTC/USDT pair, note how the breakout of the on-balance volume indicator correlates with a breakout of support, behavior that confirms the breakout in a bearish direction.
I hope that the material shared here has helped you to effectively determine the confirmation of a breakout in a bullish or bearish direction when using the on-balance volume indicator.
SOURCES CONSULTED
Investopedia What is the on-balance volume (OBV)? - On-Balance Volume (OBV) Definition. Link
OBSERVATION:
The cover image was designed by the author: @lupafilotaxia, incorporating image: Ewminteractive
Hi @lupafilotaxia
Yet another indicator I was not aware of, and from what I can see, it correlates quite well with price action.
What I would like to check is if it moves in tandem with the price or if it goes with a certain level of lag.
A few days ago I was testing one that actually proved effective in theory, but it had a considerable lag in relation to the price action and gave entry but very late.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
Hello @josevas217
One of the advantages of the OBV indicator is that it moves along with the price action, more however, to filter you should use other indicators that lead us to confirm the entry and with that you can decrease the risks of losses.
Best regards, be well.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit