http://ift.tt/1sHX1gh
Volume has always played an important role in my analysis as I have discussed in my articles on the On Balance Volume (OBV). Often times looking at a histogram plot of the daily or weekly volume, you cannot get a clear idea whether the buyers are stronger or weaker than the sellers. Some of the best investing or trading opportunities occur when you can determine that a stock or ETF is being accumulated. These are the ones that you want in your portfolio as, often before a sharp rally, the buyers are already in control of the market. One of my other favorite indicators that uses volume in addition to price is the Demand Index (DI), developed by James Sibbet. He used it almost exclusively in the commodity markets, especially the precious metals, but I have found it to be a useful tool for stocks, ETFs, or futures. Several years ago, I wrote about the Demand Index in John Murphy’s classic book Technical Analysis of the Financial Markets. I also had the pleasure of meeting Mr. Sibbet several times early in my career and I was impressed by the passion he had for his analysis. This indicator looks at the change in price along with the volume to calculate the buying pressure (BP) and the selling pressure (SP). The actual formula is quite complex but the indicator is available in many charting programs. Sibbet's original scaling method was modified so that it could be displayed on a normal scale. The most simplistic interpretation is that when the DI is rising, the BP is greater than the SP. Conversely, when it is falling, the SP is greater than the BP. When the Demand Index is above the zero line, the total buying pressure is greater than selling pressure. As was the case with the OBV, signals from the weekly data should be used to determine the major trend. For example, if the weekly studies are positive and the daily studies are negative, a short position would be recommended only for scalpers with tight stops. This is because the conflict between the daily and weekly analysis suggests just a pullback in the positive major trend.
from Forbes Real Time http://onforb.es/1tsTfXw
Volume has always played an important role in my analysis as I have discussed in my articles on the On Balance Volume (OBV). Often times looking at a histogram plot of the daily or weekly volume, you cannot get a clear idea whether the buyers are stronger or weaker than the sellers. Some of the best investing or trading opportunities occur when you can determine that a stock or ETF is being accumulated. These are the ones that you want in your portfolio as, often before a sharp rally, the buyers are already in control of the market. One of my other favorite indicators that uses volume in addition to price is the Demand Index (DI), developed by James Sibbet. He used it almost exclusively in the commodity markets, especially the precious metals, but I have found it to be a useful tool for stocks, ETFs, or futures. Several years ago, I wrote about the Demand Index in John Murphy’s classic book Technical Analysis of the Financial Markets. I also had the pleasure of meeting Mr. Sibbet several times early in my career and I was impressed by the passion he had for his analysis. This indicator looks at the change in price along with the volume to calculate the buying pressure (BP) and the selling pressure (SP). The actual formula is quite complex but the indicator is available in many charting programs. Sibbet's original scaling method was modified so that it could be displayed on a normal scale. The most simplistic interpretation is that when the DI is rising, the BP is greater than the SP. Conversely, when it is falling, the SP is greater than the BP. When the Demand Index is above the zero line, the total buying pressure is greater than selling pressure. As was the case with the OBV, signals from the weekly data should be used to determine the major trend. For example, if the weekly studies are positive and the daily studies are negative, a short position would be recommended only for scalpers with tight stops. This is because the conflict between the daily and weekly analysis suggests just a pullback in the positive major trend.
from Forbes Real Time http://onforb.es/1tsTfXw
