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Bollinger Bands.

If anyone is interested in Bollinger Bands, here is some info. from Julia Lee via ASX/Hubb:
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Julia Lee from Hubb explains how Bollinger band squeezes indicate that a price is about to break out.

Bollinger bands measure periods of volatility.

There have been numerous studies done on volatility. These studies reach one important conclusion. Markets tend to move in cycles of high volatility and low volatility. Studies have shown that a period of high volatility is often preceded by a period of low volatility.

High volatility usually signals the end of a trend. Low volatility usually signals the calm before the storm or the calm before a breakout in the share price and the beginning of a trend.

Periods of high volatility are usually followed by a period of low volatility. Periods of low volatility are usually followed by a period of high volatility.

About Bollinger band squeezes.

Bollinger band squeezes happen when there is low volatility. It indicates when there is a balance between buyers and sellers. I call it the calm before the storm.
A Bollinger band squeeze usually indicates that the price is going to break out.

Visually, they are easy to identify. They occur when the upper and lower bands are close together. They are named the Bollinger band squeezes because visually, it looks as though the upper and lower bands are being squeezed together.

A Bollinger band squeeze indicates a period of low volatility.

The problem with Bollinger band squeezes is although they indicate a breakout, they give you no clues on the direction that the breakout will be. Hence, more information is required to make money from a squeeze.

Use in conjunction with …

Bollinger bands measure volatility and to get a complete view of the chart, I recommend that you also use a price and a volume indicator as well. Using Price, volatility and volume indicators means that you are getting signals based on different aspects of the market rather than using three indicators that measure the same thing.

Determining the direction of the breakout.

So you’ve seen a Bollinger band squeeze and you know that it means that the price will probably break out. How do you determine which direction that the break out will occur?

Professor John Bollinger suggests that in determining breakout, you look at it together with the Relative Strength Index and also with a volume indicator for confirmation.

I tend to use the Bollinger band squeezes together with volume and news released by the company on profitability.

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