OBV attempts to detect when a financial instrument such as a stock or bond that is being accumulated by a large number of buyers or sold by many sellers. Traders and investors using technical analysis will use an upward sloping OBV to confirm an uptrend, while a downward sloping OBV is used to confirm a downtrend. Finding a downward sloping OBV while the price of an asset is trending upward can be used to suggest that the "smart" traders are starting to exit their positions and that a shift in trend may be coming
In the example below, Coinstar stock has a low on-balance volume when the sotck is trading under $ 20 in October 2005 indicated by the blue circle. Then notice the OBV uptrend at the start of the uptrend for the stock. Additionally, notice that in November 2007, when the stock is trading above $34, the OBV is hight. then it begins a downtrend in January 2008.