This ones about the bollanger bands (rubber bands) and how we can use them to help identify short term price action. This is the best use of bollanger bands imo, and it’s very useful to me with identifying the right time to buy and sell options. They can also be very useful for penny stocks and swings.
So what are bollanger bands? They’re imaginary lines drawn on your candle chart that identify standard deviations away from the mean. What that means is they tell you when something has moved too far in a certain direction. They can identify when a tickers price is overinflated or oversold graphically, similar to other indicators like rsi, but very easy to visualize.
So what you want to watch for is when the candles (I prefer heikin ashi) extend beyond the bollanger bands. When this happens, there is almost always a reflex in The opposite direction. This reflex move can be exploited by buying options in the money when the bands are being flexed.
So for this example, I’m going to go over INO. You can see on the daily chart, the bollanger bands are getting over extended for a few days, but afterwards there is a sever pullback. The middle bollanger can often act as a weak support and resistance, as is displayed well on this chart. Using bollanger a on a daily chart can show you the upcoming daily price action when used in conjunction with other indicators.(edited)
Ino bounces off the middle band and finds support, id expect some consolidation over the next few days between the upper and middle bands.(edited)
Here we see workhorse making the same moves on the daily, and beginning the same pullback.
This price indication can be found on 1,5,10 minute charts as well and works in both directions – this is a good example on the BA 3 min chart.
You can see early in the day, the bottom band is overextended leading to a launch to 189, where it becomes overextended in the opposite direction and pulls back to 184.
I’m conjunction with other indicators like MACD, RSI, moving averages, and vwap, this can be a powerful indicator that tells you when to buy or sell in the short term and can help you identify pullbacks and bounces. I hope you guys find this useful in determining short time price action.