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Friday’s CrowdStrike software program catastrophe has been described as “the biggest IT outage in historical past,” and it introduced residence simply how weak the planet is to itty-bitty coding errors. We have been busy publishing the DecisionPoint ALERT Weekly Wrap, so I did not have an opportunity to take a look at the chart till this morning, however what a shock it was once I noticed the sharp OBV damaging divergence arrange following the excessive quantity on June 21.
The On-Steadiness Quantity (OBV) indicator has been round because the Sixties, however my impression is that it’s not extensively used. That is in all probability as a result of the inventor, the late Joe Granville, was such bombastic determine. Nonetheless, I reduce my enamel on OBV within the Nineteen Eighties and have discovered that OBV divergences are extraordinarily useful. The issue with OBV is that it’s type of like watching grass develop — divergences usually are not frequent occurrences. OBV is straightforward to calculate. The whole day’s quantity is added or subtracted to/from the operating OBV complete based mostly upon whether or not worth closes up or down.
On the chart we are able to see that CRWD broke to new, all-time highs in June. Then on June 21 it traded down on extraordinarily excessive quantity, organising the highest of an OBV damaging divergence. CRWD went on to make one other all-time excessive on July 9, and the identical day a decrease OBV prime set the damaging divergence. Additionally on that day, the PMO crossed down by way of the sign line (crossover SELL Sign). We see that issues began to actually deteriorate on Wednesday, and on Friday the genie popped out of the bottle.
OBV divergences are normally far more delicate, so this isn’t what I might name a “textbook” case. Nonetheless, from the all-time excessive final week to Friday’s low CRWD declined about -28%, and the chart had loads of strong, not-so-subtle crimson flags. This chart makes an excellent case for OBV specifically, and technical evaluation on the whole.
–Carl Swenlin
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Technical Evaluation is a windsock, not a crystal ball. –Carl Swenlin
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Useful DecisionPoint Hyperlinks:
Worth Momentum Oscillator (PMO)
Swenlin Buying and selling Oscillators (STO-B and STO-V)
Carl Swenlin is a veteran technical analyst who has been actively engaged in market evaluation since 1981. A pioneer within the creation of on-line technical assets, he was president and founding father of DecisionPoint.com, one of many premier market timing and technical evaluation web sites on the internet. DecisionPoint focuses on inventory market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and weblog contributor.
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