The Exponential Moving Average (EMA) of the On-Balance-Volume (OBV) indicator is another trend-following tool traders use to smooth out the OBV values over a specified period. Unlike the Simple Moving Average (SMA), which gives equal weight to all periods, EMA gives more weight to recent periods. Traders use the EMA of OBV to identify trends, confirm the strength of price movements, and spot potential trend reversals. A rising EMA of OBV indicates sustained buying pressure, supporting the prevailing uptrend. Crossovers between the EMA of OBV and the price can be used to generate trading signals. Also, if the price is making new highs, and the EMA of OBV is rising, it can be interpreted as a confirmation of a strong uptrend. Conversely, divergences between the EMA of OBV and price movements may signal potential trend reversals.
