What does a combination of rising on-balance volume and declining price action suggest?

A combination of rising on-balance volume (OBV) and declining price action suggests the presence of bullish divergence. This occurs when the price of a security is declining or stalling, while the OBV is increasing. The rising OBV indicates that more volume is associated with upward price movements, which signifies accumulation of the asset despite the declining price action.

This divergence often signals that the underlying strength in volume may lead to a future price reversal or upward momentum. Traders typically interpret this scenario as an indication that the sell-off might not be sustainable, and the market could be gearing up for a potential rebound. Recognizing this pattern can be critical for identifying buying opportunities before a bullish trend emerges. Thus, the situation where volume is increasing while price is declining presents an opportunity for traders to adjust their strategies in anticipation of a price recovery.