This is Why I Track Bollinger Band Squeezes (MBLY)

June 14, 2015

I often talk about how I like to use Bollinger Bands to catch range contraction-to-expansion moves. Just last week Mobileye made a nice move after being in a Bollinger Band Squeeze for a very short time. You can see on MBLY's recent events page that a Squeeze started on May 8th. As I've written before, John Bollinger has noted that you'll often see stocks in a squeeze tag one band and then reverse and shoot through the opposite band:

Traders beware! There is a trick to The Squeeze, an odd turning of the wheel that you need to be aware of, the head fake. Often as the end of a Squeeze nears, price will stage a short fake-out move, and then abruptly turn and surge in the direction of the emerging trend...

So MBLY had all the ingredients to do exactly what Mr. Bollinger laid out. MBLY's trend table page shows that it was trending up and then went trendless (according to ADX & Directional Movement) once the Squeeze began. Then it crossed the lower band and reversed to close back above the lower band and proceeded to launch above the upper band. That was such a strong move that it's now walking up the upper band, which is another classic thing that Mr. Bollinger has written about.

This is why I built the Bollinger Band alerts / scans into the site. I'm always checking the "Bollinger Band Squeeze Started", "Squeeze Plus Upper Band Touch" and "Squeeze Plus Lower Band Touch" scans for trading candidates.