How to recognize patterns with Bollinger Bands like a pro?
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Hi, mooers! Welcome back to the Bollinger Bands TA Challenge!![]()
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Beginners always want to be consistently profitable traders. To achieve that, they need to learn how to gauge trends with Bollinger Bands. Today, we are going to introduce the top 6 Bollinger Bands chart patterns. Let's see if you can recognize them.
Beginners always want to be consistently profitable traders. To achieve that, they need to learn how to gauge trends with Bollinger Bands. Today, we are going to introduce the top 6 Bollinger Bands chart patterns. Let's see if you can recognize them.
1. The Bollinger Bounce
The price's tendency to return to the middle of the band is called the Bollinger Bounce.
Can you tell where the price might go next from the chart below?
The price's tendency to return to the middle of the band is called the Bollinger Bounce.
Can you tell where the price might go next from the chart below?
Go down? Bingo! As you can see, the price settled back down towards the middle area of the bands.
Why would there be bounces? It is because the Bollinger Bands chart the stock's dynamic support and resistance levels. The longer the time frame, the stronger the bands tend to be.
2. Bollinger Squeeze
A squeeze occurs when the price moves aggressively and then starts moving sideways in a tight consolidation.
Looking at the chart below, we can see the bands squeezing towards each other. At the far right end of the chart, the price started to break out of the upper band. Where do you think it would go?
A squeeze occurs when the price moves aggressively and then starts moving sideways in a tight consolidation.
Looking at the chart below, we can see the bands squeezing towards each other. At the far right end of the chart, the price started to break out of the upper band. Where do you think it would go?
Bingo! It's rising.
The price will likely move UPWARD if the candles break out above the UPPER band. In contrast, the price will probably go down if the candles break out below the LOWER band. This strategy is designed for you to catch a move as early as possible.
3. Breakout
When you see the price hitting or exceeding the upper band, traders may expect the price to rise further, but what happens could be the price going back to the moving average.
We can see from the chart below that when the price breaks the upper band, both the upper & lower band expand. The probability of moving further up is high.
When you see the price hitting or exceeding the upper band, traders may expect the price to rise further, but what happens could be the price going back to the moving average.
We can see from the chart below that when the price breaks the upper band, both the upper & lower band expand. The probability of moving further up is high.
4. Reversal
The price may gap above the upper band but close near the low for the interval, which signals that the trend may reverse soon. The trader may take a short position and target the middle band.
Likewise, the price may fall below its lower band but close near the high for the interval, which indicates that the trader could go long and target the middle band.
The price may gap above the upper band but close near the low for the interval, which signals that the trend may reverse soon. The trader may take a short position and target the middle band.
Likewise, the price may fall below its lower band but close near the high for the interval, which indicates that the trader could go long and target the middle band.
As you can see from the chart, the first red candle after the highs was a bearish engulfing candle. Then the stock quickly rolled over.
5. Double Bottom
A double bottom occurs when there is a fall in price, followed by a rise, another fall close to the previous low, and another rise.
A double bottom occurs when there is a fall in price, followed by a rise, another fall close to the previous low, and another rise.
Without Bollinger Bands, the stock could look like going down on the second low, especially if the second low is lower than the first. But with Bollinger Bands, the second low may indicate that the stock could be preparing for an uptrend.
6. The Classic M Top
The classic M top is formed by a push to a high level, followed by a sell-off reaction, and then a test of the previous high.
Are you wondering if the stock is in a new uptrend or if it has met its resistance?
The classic M top is formed by a push to a high level, followed by a sell-off reaction, and then a test of the previous high.
Are you wondering if the stock is in a new uptrend or if it has met its resistance?
We can see that the first high either touches or exceeds the upper band. The price reacts by dropping close to the middle band and then reaching the second high inside the upper band.
The second high is within the upper band, suggesting a lower high on a relative basis. For many traders, the second high signals a sell.
The second high is within the upper band, suggesting a lower high on a relative basis. For many traders, the second high signals a sell.
Where to post?
TA Challenge: Breakout? Reversals? How to use Bollinger Bands?
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Milk The Cow : Hmm... very chim (profound) eh
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Milk The Cow :
Milk The Cow Milk The Cow: To be able to get 6 pointers out of BB
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Danny Milner : Nice presentation.
Meta MooOP Milk The Cow:
Meta MooOP Danny Milner: Thanks!
Warlord1267 : Very interesting presentation.
MultiBaggers : The inverted yield curve
TanJames6 : Thanks for sharing
StevenOng4 : Give me a better picture
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