HINDALCO INDUSTRIES

8-Apr-2013 (11 PM AEST)

Let's talk about Hindalco Industries. It's of special choice because I have bought many lots of it! :-)

Why Hindalco?
I was doing some studies, like when MACD, RSI, Stoch all are favourable - why a stock "sometimes" give surprises. I'm after a clear working strategy. I then came across this indicator "OBV". OBV would often move before price

About OBV :

On Balance Volume (OBV) measures buying and selling pressure as a cumulative indicator that adds volume on up days and subtracts volume on down days. The On Balance Volume (OBV) line is simply a running total of positive and negative volume. 

OBV rises when volume on up days outpaces volume on down days. OBV falls when volume on down days is stronger. A rising OBV reflects positive volume pressure that can lead to higher prices.

Conversely, falling OBV reflects negative volume pressure that can foreshadow lower prices.

Expect prices to move higher if OBV is rising while prices are either flat or moving down. Expect prices to move lower if OBV is falling while prices are either flat or moving up.

The absolute value of OBV is not important. Chartists should instead focus on the characteristics of the OBV line.

1.     Define the trend for OBV.

2.     Determine if the current trend matches the trend for the underlying security.

3.     Look for potential support or resistance levels. Once broken, the trend for OBV will change and these breaks can be used to generate signals.

Notice that OBV is based on closing prices. Therefore, closing prices should be considered when looking for divergences or support/resistance breaks. And finally, volume spikes can sometimes throw off the indicator by causing a sharp move that will require a settling period.

Bullish and bearish divergence signals can be used to anticipate a trend reversal. These signals are truly based on the theory that volume precedes prices. A bullish divergence forms when OBV moves higher or forms a higher low even as prices move lower or forge a lower low.

A bearish divergence forms when OBV moves lower or forms a lower low even as prices move higher or forge a higher high. The divergence between OBV and price should alert chartists that a price reversal could be in the making.

About Hindalco:

It’s OBV signaling that the trend is changed. :-) Supported by MACD Divergence, RSI Divergence. I’m quite sure this will shoot. Let’s watch if it makes me rich!