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Definition

A financial public speaker and writer from America, Joseph Granville championed the idea of using volumes as a key technical indicator. He developed the On Balance Volume technique (OBV) which is designed to highlight unusual spikes in volume traded accompanied by small increases in price. The technique begins with an arbitrary number like 1 000 000 and then adds the volume traded on days when the price went up and subtracts it on days when the price fell. A chart is drawn of the result. When the chart suddenly spikes upwards, at an acute angle to the vertical, that is an OBV buy signal. The logic of this is that large increases in volume accompanied by small incremental increases in price is a clear indication of positive insider trading. Granville said that "volume leads price" meaning that the increase in volumes would portend a rising price pattern. A good example of this is Labat (LAB) which saw massive increases in volume with rising prices from 11th June 2020 - subsequently the price rose sharply. Consider the chart: 
<center>
<figure class="figure"><a class="lightbox" href="/onlinecourse/images/Joseph_Granville.png" data-plugin-options="{'type':'image'}"> <img class="figure-img img-fluid" src="/onlinecourse/images/Joseph_Granville.png" /></a>
<figcaption class="figure-caption">Labat (LAB): 14 May 2020 - 26 June 2020. Chart by ShareFriend Pro.</figcaption>
</figure>
</center>
The top chart is a standard candlestick chart of the share's price, the middle chart is an OBV chart and the bottom chart is a volume histogram with a 30-day simple moving average running through the middle of it. Note that volumes began to rise sharply from 8th June 2020 accompanied by small increments in the share's price. This caused the OBV chart to spike upwards forming an acute angle which is a classic OBV buy signal. The signal was given on Friday 19th June 2020 and we drew clients' attention to it with an <a href="/index.php/on-balance-volume">article</a>. On that day the share closed at 46c. A week later on Friday 26th June 2020 it closed at 75c - a gain of 63% in a week.

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