1. Bollinger Bands By: Reggie Mah Anne Campbell Jessica Holtrom

2. What is It?

4. John Bollinger John Bollinger was the first to acknowledge "tags of the bands are just that - tags, not signals. A tag of the upper Bollinger band is not in and of itself a sell signal. A tag of the lower Bollinger band is not in and of itself a buy signal". (Schlossberg, 2008)

7. When the upper and lower bands are further apart from each other it signifies high volatility in prices and traders will usually sell their options, if the bands are closer together it represents low volatility in the market and it is a sign to buy.

9. His theory holds true when viewing Google stock over a two year period. During the upward trend from September through December 2007, the stock price consistently remained over the 20 day average but was contained within the upper band.

10. The same is true for the downward trend from January through March 2008, where the price remained below the 20 day average yet was supported along the lower Bollinger band.

12. As demonstrated by the Starbucks chart, Bollinger bands can help determine the strength of a particular trend (Stockcharts.com, 2008). Where the Bollinger bands are widest around the moving average, a consistent trend is present, as demonstrated by the upwards trend in this stock. This is confirmed in the months November 1999 and February 2000, where there is consistent point gain by Starbucks.

13. As the trend declined and the stock’s price became fairly consistent, a period of transition was signalled. From December to January, the Bollinger bands began to tighten around the moving average. The tightening indicated there would be a change in trend, whether a rapid decline in the price of Starbuck’s stock or a drastic increase.

14. How are They Calculated?

18. Aftermath

22. John Murphy suggests that where the stock price stays above the 20 day average yet meets resistance from the upper band, the market tends to be bullish. The opposite is true for a bearish market, where the price is below the moving average yet has support from the lower band (Murphy, 1996) It is important to realize that Bollinger bands cannot predict whether the trend will be upward or downward, but rather only the strength of a trend (Murphy, 1996).

23. The Conclusion

24. Overall, Bollinger bands have been proven to be a useful tool in technical analysis. By predicting the strength of trends, as well as helping in determining the volatility of the market, Bollinger bands give investors clues as to when to buy or sell a particular stock for the highest possible profit.