Here is one of NeboXian’s secret weapons.
Third extreme Bollinger Band which is touched at times but Rarely Penetrated.
Three Bollinger Bands with different deviations
low green, average blue and high green
Keltner Channel purple
20 Sma red
50 Sma tan
Bollinger Bands Are designed as a Volatility Channel and track the Extreme Movement of price away from an average price over a specified period of time.
When price moves to far away from the mean (average price) it tends to return to a balance in the middle.
This study shows Three Deviation Bands
All are looked at in different ways depending if price is in a range or trending.
I find the 2 Hr Candle chart works best for me.
I want to concentrate on the Third Extreme Bollinger Band which is touched at times but rarely penetrated.
A penetration dose not foretell a reversal but rather a pending change in momentum and direction.
There could be a slowing of upward thrust or a pending sideways consolidation (waiting for mean to catch up) that could lead to a reversal or at least a hasty return to the mean.
The Keltner Channel is used to confirm price directional change. During a trend, a sharp directional change away from the B Bands that holds for a period of 4 candles makes me confident the overall price will continue in the new direction or return to the Mean.
Here are a series of 4 charts
June 1 , 09 Top of trend Directional change with 9 …. 2 hr candles sideways and to the mean.
Keltner goes flat after 4 th candle then down after 6 th
June 11 , 09 The End of 9 Days in a Range Sideways and the beginning of the June /July correction
B Bands Flat , K chan Flat into the spike then K chan turned down and price broke mean after 6 candles to start down trend.
June 23 ,09 Thursday’s Third Rail Penetration has so far resulted in the stopping of the upward trend momentum
and 7 sideways candles under the right angled Keltner Channel….
Next week of July 27
With such a strong up trend we may see price float to the upper side of the Keltner and see the upper B Bands flatten out and contract as well…. I am not expecting any real reversal of price here but we will most likely consolidate sideways in a range for a good period of time. 7 to 10 trading days… Then we will see what happens next.
For more Info on Bollinger Bands visit the Bollinger Sight
Market Trader Tao 