Uber: The power of volume

Volume speaks louder than words

With my busy schedule, I didn’t write for two years, something I regret but made no effort to ameliorate. A big reason, as I discovered with traders, also, is a lack of focus. It’s pretty easy to bang one out when you have a specific theme in mind or have a bone to pick. A good example are TV shows—the ones that play season after season have a certain theme that plays out in so many different situations while you the viewer have something comfortable and familiar to watch in an uncertain setting. With markets, if your general strategy is the same - you can weather whatever the market sells you daily. I guess that’s what keeps me in the game.

For me, I feel that if I focus on volume, and the loadstone OBV, I’ll have something to focus on daily. What triggered my excitement was a book I picked up by Buff Dormeier and lo and behold, Joe Granville is one of the blurbs on the cover who writes about how cool Buff is. So it comes full circle. He handed his aegis down.

Volume = Money placed in the market. A price may move up a lot but without money backing it up it will fall down again (think SPACs). Yet even if Volume speaks louder than words, a big $8 move in UBER will most likely catch a lot of attention. For those who really don’t care about a company's day-to-day actions, it’s probably alright to buy shares here and wait it out, but what about those who want to catch a move with a tailwind at its back? That, I believe, requires some reasonable volume analysis.

Looking at UBER on a daily basis before it rose to ATH (all-time high), the OBV was resting on support or balance (vertical red line). Now, almost immediately, it broke out of a multi-month consolidation. This real-time example demonstrates the power of OBV, but it requires a stock you will follow and like its potential. The additional requirement is time: for it to rise as such, it took money and a conviction of the data for you to come out.

Now, let's look at a bigger time frame and see if any picture can be gleaned. What do you see?

Uber’s trend is up, but the OBV is down. I have found that it doesn’t mean the stock will reverse immediately or ever, but that it indicates that for this stock’s price to go higher, volume will have to play catch-up and surprises can occur.