AMITBE said:
Hi Kishore and Karthik...nice to see you again...
Kishore, it would have helped if you had reasoned out the reading you are taking off Bollinger Bands for Matrix.
Bollinger Bands are designed to indicate the confirmation of a trend and a measure of its volatility.
The price of a stock, represented by its 20 day Simple Moving Average, is enveloped by an upper and lower band, the Bollinger Bands. Some analysists take Exponential Moving Average in place of the Simple. The three, meaning the central price line and the two bands are derived from price action using different methods of computation.
Bollinger Bands is an indicator which lets us compare volatility and relative price levels over a period of time. The bands encompass a stock's price action, meaning its volatility. The upper band is the simple moving average plus 2 standard deviations. The lower band is the simple moving average minus 2 standard deviations.
There is a mathematical formula that is used to calculate the Standard Deviation of a stock over a given period of time. In other words, Standard Deviation is the measure of a stock's volatility over a given period. (This is very useful when determining the trailing stop loss levels also. In a trade when the price breaks below this level, meaning a more than expected volatility to the down, the s/l is triggered.)
The main feature of Bollinger Bands is that the space between the bands varies depending on the volatility of the price. When volatility is high, the bands become wide spaced to contain the high and low pikes. During periods of low volatility, the bands narrow down containing the price action.
Normally Technical asnalysts see two different aspects of price action from this indicator.
One significance of it is, when the price pushes against or transgresses the Bollinger Bands on either side, it would normally signify a continuation of the trend rather than a reversal. Even when the price pikes outside the bands, a continuation of the current trend is implied.
The other indication is of trend reversal.
On the one hand, when the stock price constantly presses against the upper band, it is thought to be overbought, and conversely when it clings continually to the lower band, the price is thought to be oversold. Thus an oncoming trend reversal is assumed and sell or buy signals generated.
On the other hand, let us assume that the upper and the lower bands are seen as price targets. If the price bounces off the lower band and crosses above the 20-day average, the middle line, the upper band would represent the price target, going by the historical volatility of the price.
In a strong uptrend, the price is assumed to fluctuate between the upper band and the 20-day moving average. But here, should the price break the 20 DMA to the down with force, it warns of a trend reversal to the downside.
Conversely, a similar price action in the midst of a down trend would signal a reversal to the up.
Coming to Matrix, the distinctive feature of the chart is that it is more erratic than volatile, though moving sideways mainly. The point about the erratic is primarily a visual reaction rather than a tech conclusion: The bands are rather wide, with the erratic middle line.
As Karthik has pointed out, the impression is bearish in the short term. The resistances seem correctly described too.
I would like to see the Bollinger Bands contract and become narrower for a period of time. The implication is a marked drop in volatility, the precursor to a breakout.
Would love to get your feedback.
Regards.
Kishore, it would have helped if you had reasoned out the reading you are taking off Bollinger Bands for Matrix.
Bollinger Bands are designed to indicate the confirmation of a trend and a measure of its volatility.
The price of a stock, represented by its 20 day Simple Moving Average, is enveloped by an upper and lower band, the Bollinger Bands. Some analysists take Exponential Moving Average in place of the Simple. The three, meaning the central price line and the two bands are derived from price action using different methods of computation.
Bollinger Bands is an indicator which lets us compare volatility and relative price levels over a period of time. The bands encompass a stock's price action, meaning its volatility. The upper band is the simple moving average plus 2 standard deviations. The lower band is the simple moving average minus 2 standard deviations.
There is a mathematical formula that is used to calculate the Standard Deviation of a stock over a given period of time. In other words, Standard Deviation is the measure of a stock's volatility over a given period. (This is very useful when determining the trailing stop loss levels also. In a trade when the price breaks below this level, meaning a more than expected volatility to the down, the s/l is triggered.)
The main feature of Bollinger Bands is that the space between the bands varies depending on the volatility of the price. When volatility is high, the bands become wide spaced to contain the high and low pikes. During periods of low volatility, the bands narrow down containing the price action.
Normally Technical asnalysts see two different aspects of price action from this indicator.
One significance of it is, when the price pushes against or transgresses the Bollinger Bands on either side, it would normally signify a continuation of the trend rather than a reversal. Even when the price pikes outside the bands, a continuation of the current trend is implied.
The other indication is of trend reversal.
On the one hand, when the stock price constantly presses against the upper band, it is thought to be overbought, and conversely when it clings continually to the lower band, the price is thought to be oversold. Thus an oncoming trend reversal is assumed and sell or buy signals generated.
On the other hand, let us assume that the upper and the lower bands are seen as price targets. If the price bounces off the lower band and crosses above the 20-day average, the middle line, the upper band would represent the price target, going by the historical volatility of the price.
In a strong uptrend, the price is assumed to fluctuate between the upper band and the 20-day moving average. But here, should the price break the 20 DMA to the down with force, it warns of a trend reversal to the downside.
Conversely, a similar price action in the midst of a down trend would signal a reversal to the up.
Coming to Matrix, the distinctive feature of the chart is that it is more erratic than volatile, though moving sideways mainly. The point about the erratic is primarily a visual reaction rather than a tech conclusion: The bands are rather wide, with the erratic middle line.
As Karthik has pointed out, the impression is bearish in the short term. The resistances seem correctly described too.
I would like to see the Bollinger Bands contract and become narrower for a period of time. The implication is a marked drop in volatility, the precursor to a breakout.
Would love to get your feedback.
Regards.
Saint
. Should i average or sell out. Rainmaker