The OVI Tips Its Hat

The meaning is essentially “Let the market show you where it’s going”.  

It’s a nice little saying but when I started in this game, how on earth could I tell where the market was likely to go as a novice trader?  

Well, time and experience certainly contribute, but I dare say the majority of experienced investors and traders still have no real idea where the market is likely to go next.  

However, as so many of my students have confirmed, the OVI does give a rather unfair advantantage over our peers.  

And as such, I think the saying should be updated to “Let the OVI tip its hat …”, because this is exactly what it does.  

Here are just a few examples where the OVI has done just that, and where profits were there for the taking.  And while we’re at it, look out for one of these symbols of the OVI tipping its hat on the charts: 

SPY 
OVI turns negative at the beginning of April and forms bear flags.  

AAPL
You know all about this … from early December the OVI turned positive heralding a move of over $260, and then in early May it turned negative immediately preceeding a bear flag that was worth $20+.  

AMZN 
Formed a bear flag with a negative OVI, it broke down today (Wednesday). 

BAC 
Over the last 14 months you could have just traded BAC and you’d be hundreds of percent up!  The chart is only looking at this year.  

NFLX 
Lots of opportunities in 2011, and more in 2012 as well.  

QQQ 
The OVI turned negative in early April … and we’re down plenty since then.  

RIMM 
OVI was negative for most of 2011 and 2012 … and the stock duly obliged by trending downwards. 

There are dozens more examples – but the key is to remember to be fussy and stick to the obvious opportunities where the OVI and the chart pattern are in sync.  

All the best

Guy