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Bollinger Bands
A band plotted two standard deviations away from a simple moving average.
Above is an example of bollinger bands, the price of the stock is banded by an upper and lower band along with a 20-day simple moving average.
Because standard deviation is a measure of volatility, Bollinger Bands adjust themselves to the market conditions. When the markets become more volatile the bands widen (move further away from the average), and, during less volatile periods, the bands contract (move closer to the average).
This is among one of the most popular technical analysis techniques. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market.
greencat:notes
I use the bollinger bands to help me find socks on the bottom. I also like to find stocks where the bollinger band has closed it tight. I will put that symbol on my watch list because usually it meand the sock is going to move one way or the other. A pretty good move up or down. I would never buy solely on the bolinger bands.
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I've read that about what you say about the tightening of bolinger bands. That it's an indication it's about to make some kind of move.
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yes one way or another it will move so that only gets them on the watch list to see which way they are going to go
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I have a perfect example per Greencat's contraction statement. This is the chart for one of my fav stocks, USMO. Look at the time period of March, nice contraction, then the stock moves up (my fav direction). Also observe the downward fall in mid-November, contraction, then the stock drops:
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That's a good example Thad.Thanks.
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