Negative Volume Index (NVI)

The Negative Volume Index (NVI) provides buy signals for a given stock when the price is trending upward while the volume is trending downward.

Negative Volume Index (NVI)

The Negative Volume Index (NVI) provides buy signals for a given stock when the price is trending upward while the volume is trending downward.

The NVI and the Positive Volume Index (PVI) are together known as price accumulation volume indicators. They were first developed in the 1930s by Paul L. Dysart, who used market breadth indicators such as the advance-decline line to generate the PVI and NVI.

The indicators gained popularity following their inclusion in a 1976 book titled "Stock Market Logic" by Norman Fosback, who expanded their application to individual securities.

 


Negative Volume Index Calculation

The Negative Volume Index is calculated based on price movements on days with increased volume.  A single input parameter is required which is the number of days used to compute the signal line (moving average of NVI).

Negative Volume Index Interpretation

The premise behind this indicator is that price changes on high volume days are a result of uninformed investors while price changes on decreased volume are due to informed investors.

Price chart with Negative Volume Index indicator plotted below it


Following this premise, increases in the Negative Volume Index are taken as indicative of smart money buying into the stock.  Buy (long) signals are recommended when the NVI crosses above its 255-period moving average.  Sell (short) signals are recommended when the NVI crosses below its 255-period moving average. 


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