A Volume Oscillator uses a fast and slow moving average to measure whether the volume trend is increasing or decreasing. Conventionally, the fast moving average uses a 14-day period and the slow moving average deploys a 28-day period. If the fast moving average is above the slow moving average, the oscillator will be positive. If the fast moving average is below the slow moving average, the oscillator will be negative.
The Volume Oscillator is a non-bound oscillator. It fluctuates above and below the zero line. A positive value indicates market support is sufficient to drive the prices up further; a negative value indicates a lack of support to maintain the current trend of the prices and may start to reverse.
Rising volume or positive volume oscillator signals a strong trend. Falling volume or negative volume oscillator denotes a weak trend. When the prices are increasing and the volume is increasing, it denotes a bullish market. When the prices are falling and the volume is decreasing, it signals a bearish market. When the prices are falling and the volume is increasing, there is a panic selling in the market.
The Volume Oscillator is similar to the Percentage Volume Oscillator or PVO. The difference is that the PVO is evaluated on a percentage.