Price and Volume Trend
Price and Volume Trend (PVT) is a variation of On Balance Volume, used to determine the strength of trends and warn of reversals.
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Price and Volume Trend should not be used on its own but in conjunction with other indicators.
During a ranging market watch for a rising or falling Price and Volume Trend.
- Rising PVT signals an upward breakout.
- Falling PVT signals a downward breakout.
A rising Price and Volume Trend confirms an up-trend and a falling PVT confirms a down-trend.
- Bullish divergence between PVT and price warns of market bottoms.
- Bearish divergence between PVT and price warns of market tops.
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Australia and New Zealand Banking Group Limited (ANZ) is shown with Price Volume Trend.
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- After a strong up-trend there is a bearish divergence with price making a new high and Price and Volume Trend making a lower high.
- This is followed by a triple divergence: price makes a higher peak while PVT is lower.
- Price makes another new high at the end of February while PVT again fails to make a new high. Note the classic divergence.
The steps in the Price and Volume Trend calculation are:
- Calculate the Percentage Change in closing price:
( Closing Price [today] - Closing Price [yesterday] ) / Closing Price [yesterday]
- Multiply the Percentage Change by Volume:
Percentage Change * Volume [today]
- Add to yesterday's cumulative total:
Percentage Change * Volume [today] + PVT [yesterday]