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Price And Volume Trend (PVT)

Overview

The Price and Volume Trend (PVT) is similar to OBV. It is a cumulative total of volume that is adjusted depending on changes in closing prices. But, OBV adds all volume on days when prices close higher and subtract all volumes on days when prices close lower. PVT on the other hand, adds/subtracts only a portion of the daily volume. The amount of volume added to PVT is determined by the amount that prices rose or fell relative to the previous day's close (Achelis 1995).

Because of their differences, many investors feel that PVT more accurately illustrates the flow of money into and out of a security than does OBV.


How it is calculated

Today's PVT is calculated by:


How to interpret

The interpretation of PVT is similar to the interpretation of A/D lines.

Divergence

A bullish divergence occurs when price makes a low, then corrects moving higher, and subsequently, reaches a lower low. At the same time, PVT makes a low followed by a higher low.

A bearish divergence occurs when price makes a high, then corrects moving lower, and subsequently, reaches a higher high. At the same time, PVT makes a high followed by a lower high.


Example

China Petro made a high, pullback, then moved to a higher high on 14 July 2005. At the same time, PVT formed a lower high. This bearish divergence was followed by a strong price decrease.

BUY

  • Positive divergence
  • Confirmation: price makes a high, then corrects moving lower, & subsequently reaches a higher high. At the same time, PVT makes a high followed by a higher high.

SELL

  • Negative divergence
  • Confirmation: price makes a low, then corrects moving higher, & subsequently reaches a lower low. At the same time, PVT makes a low followed by a lower low.

References :

  • Achelis, S. B., Technical Analysis from A to Z, 1995
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