Color Coding is a useful tool in the Inductive Method. Not only does it get you into the text to pick out each observation, it helps you see how the flow of a book is laid out. Remember good observations are key to good interpretations. The more you see, the more you have to build a biblical interpretation.

So color away your text.

Also just as a side note, in the observation process were just looking to see what is there, not to interpret it.