Bollinger Bands are a technical analysis tool invented by John Bollinger in the 1980s. They are an indicator that allows users to compare volatility and relative price levels over a period time. The indicator consists of three bands designed to encompass the majority of a security's price action.
- A simple moving average in the middle (we use a 20-day MA)
- An upper band (SMA plus 2 standard deviations)
- A lower band (SMA minus 2 standard deviations)
Bollinger also discusses another way of using the bands for trading. Closes outside the Bollinger Bands can be interpreted as continuation signals, not reversal signals. This approach has been the basis of some very successful volatility-breakout systems.
Today we offer a list of those stocks that closed above or below their respective upper or lower bands on Friday, Dec 26. Right click on the following link and save to your computer: TradeRadar Bollnger Band Breakouts
Those that closed above the upper band are labeled "Bullish Breakout." Conversely, those that closed below the lower band are labeled "Bearish Breakout."
As John Bollinger recommends, it is important to use other indicators to confirm whether the breakout is a continuation move or not. Or, as I always suggest with respect to Alert HQ signals, add a few of these to a watch list and see what happens.