OBV is a running total of volume. If the stock closes higher all the volume for that day or period is added to OBV, and the OBV indicator rises. If the stock closes lower all the volume is subtracted and OBV falls.
Volume tracks the intensity of the financial and emotional commitment of traders.
Since OBV is a running total of Volume its a great way to track the changes in traders involvement in a stock. When OBV reaches a new high it shows the bulls are strong, the bears are in pain and prices are likely to rise. Vice-versa if OBV reaches a new low. When the pattern of OBV deviates from the pattern of prices, it shows that mass emotions are not in gear with mass consensus. A crowd is more likely to follow its heart than its mind.