On Balance Volume Technical Indicator (OBV) is a momentum technical indicator that relates volume to price change. OBV is a simple indicator that adds a period's volume when the close is up and subtracts the period's volume when the close is down. A cumulative total of the volume additions and subtractions forms the OBV line.
The basic assumption, regarding On Balance Volume analysis, is that OBV changes precede price changes. The theory is that smart money can be seen flowing into the security by a rising OBV.
If the security’s price movement precedes OBV movement, a "non-confirmation" has occurred. Non-confirmations can occur at bull market tops (when the security rises without, or before, the OBV) or at bear market bottoms (when the security falls without, or before, the On Balance Volume Technical Indicator).