Indicator: CCI coded OBV

The CCI coded OBV indicator merges On-Balance Volume (OBV) with Commodity Channel Index (CCI) logic to provide a volume-based momentum oscillator that visually identifies trend shifts and price-volume divergence.

Usage

The Usage section focuses on the integration of volume trend and momentum sentiment. Traders can use the color-coded OBV line to determine if the current volume flow is supported by momentum as defined by the CCI. When the OBV line is green, it indicates that volume is accumulating while CCI is above the user-defined threshold, suggesting bullish momentum. Conversely, a red OBV line indicates that CCI has fallen below the threshold, suggesting bearish momentum or distribution.

The inclusion of an Exponential Moving Average (EMA) provides a baseline for trend direction and potential crossover signals. A common strategy involves monitoring for crossovers between the OBV line and its EMA:

• Bullish Signal: The OBV line crosses above the EMA while colored green.
• Bearish Signal: The OBV line crosses below the EMA while colored red.

Details

The script calculates On-Balance Volume (OBV) by keeping a running total of volume based on whether the current closing price is higher or lower than the previous close. It then calculates the Commodity Channel Index (CCI) based on a specified lookback period.

The core logic applies a conditional coloring to the OBV plot: if the CCI value is greater than or equal to the "CCI threshold," the plot displays a bullish color; if the CCI is below the threshold, it displays a bearish color. This allows users to filter volume movements through a momentum-based lens. The EMA is applied directly to the OBV data to smooth the output and provide a signal line for trend following.

Settings

• CCI Length: Determines the lookback period used for the Commodity Channel Index calculation.
• CCI threshold for OBV coding: The level at which the OBV line changes color. Setting this to 0 ensures color changes occur at the CCI baseline.
• EMA length: Sets the number of periods for the Exponential Moving Average plotted over the OBV.

FAQ

How do I interpret the color changes on the OBV line?

The color changes represent the relationship between momentum and volume. A green line indicates the CCI is above your threshold (typically implying bullish momentum), while a red line indicates the CCI is below the threshold (implying bearish momentum).

Can I use this for divergence trading?

Yes, users can look for instances where price makes a new high but the CCI coded OBV fails to make a new high or remains red, which may indicate weakening buying pressure.

How do I access this indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.