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Bollinger Bands Indicator Bulge and Squeeze Technical Analysis

The Bollinger Bands are self adjusting which means the bands widen and narrow depending on volatility.

 

Standard Deviation is the statistical measure of the volatility used to calculate the widening or narrowing of the  bands. Standard deviation will be higher when prices are changing significantly and lower when markets are calmer.

  • When volatility is high the Bands widen.
  • When volatility is low the Bands narrows.

 

The Bollinger Squeeze

Narrowing of Bands is a sign of consolidation and is known as the Bollinger band squeeze.

 

When the Bollinger Bands display narrow standard deviation it is usually a time of consolidation, and it is a signal that there will be a price breakout and it shows people are adjusting their positions for a new move. Also, the longer the prices stay within the narrow bands the greater the chance of a breakout.

Bollinger Bands Squeeze

Bollinger Squeeze


The Bollinger Bulge

The widening of Bands is a sign of a breakout and is known as the Bulge.

 

Bollinger Bands that are far apart can serve as a signal that a trend reversal is approaching. In the example below, the bands get very wide as a result of high volatility on the down swing. The trend reverses as prices reach an extreme level according to statistics and the theory of normal distribution. The "bulge" predicts the change to downtrend.

Bollinger Bands Bulge

Bollinger  Bulge

Forex Market Sentiment

The EURUSD is at a major support level, Open an account and start trading EURUSD which is oversold and at a major support level: Read The Article "Support and Resistance levels"

Another reason to start being bullish on the EURUSD and EURJPY is Risk Appetite vs The Risk Averse sentiment used when trading high yielding currencies vs the US Dollar and the Japanese Yen when world economies start reporting data that is supporting economic growth: Read The Article "Risk Appetite vs The Risk Averse"


Eurozone Economic Growth Gains Momentum in November - Eurozone economic growth accelerated to its fastest pace and was at an all-time high, order books grew and factories were prompted to add more workers and raise the prices of their goods as the economic environment in Europe grew the fastest as shown by economic data – November Composite PMI for manufacturing and services grew to the strongest in 18 months and was at an all-time high of 54.1, up from 53.3 in October. There are two PMI data reports - one for manufacturing and the other one for services. The PMI for manufacturing was at an all-time high of 34 months and rose to 53.7 in November while that of services rose to an all-time 11 months high of 54.1; Marking a strong expansion in economic growth and signaling that the recovery in Europe is continuing to gather momentum thanks to the €1.7 trillion quantitative-easing program being carried out by ECB in Europe. IHS Markit has said that companies are on boarding new staff at the fastest pace ever since 2008, as the prices of goods increased the most in five years as companies continued to pass the production cost to their consumers – the November PMI showed the steepest monthly increase in business activity with plenty of signs that the economic growth will continue to accelerate as the inflation in Europe continues to intensify steadily. Open an account and start trading EURUSD and EURJPY today.


Major Market Mover - Non Farm Payrolls on Friday: Open an Account Today and Trade NFP on Friday

First OPEC Deal on Oil production cut in 8 years fuels more risk appetite: Open an Account Today - Don't Miss Out on the trades


Read The Articles: Eurozone Economic Growth Gains Momentum in November - Fueling Risk Appetite in FX trading


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