FAZ - Divergence In On Balance Volume

It looks like Direxion Financial Bear 3X Shares ETF (FAZ) is setting up some nice divergence in the OBV - On Balance Value indicator. I provided a description of the indicator below. Essentially when the price closes up on strong volume, the OBV moves higher and vice versa.

With financial issues rallying to make higher highs, it appears that there could be an accumulation of FAZ going on at these levels for an eventual push lower with financials.

The OBV indicator - On Balance Volume :

As stated above, OBV is calculated by adding the day’s volume to a running cumulative total when the security’s price closes up, and subtracts the volume when it closes down. The idea behind the OBV indicator is that changes in the OBV will precede price changes. A rising volume can indicate the presence of smart money flowing into a security. Then once the public follows suit, the security’s price will likewise rise.

For example, if today the closing price is greater than yesterday’s closing price:

OBV = Yesterday’s OBV + Today’s Volume ;

If today the closing price is less than yesterday’s closing price:

OBV = Yesterday’s OBV - Today’s Volume

If today the closing price is equal to yesterday’s closing price:

OBV = Yesterday’s OBV

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