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Response:

Calculated Shard: 148 (from laksa039)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/technical/04/030304.asp\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/technical/04/030304.asp\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp","crawl_time":1775466008,"first_indexed_time":1510558344,"http_code":200,"src_unparsed":"com,investopedia!www,\/articles\/technical\/04\/030304.asp s443","src_root_hash":"7273739457760125548","history_drop_reason":null,"meta_title":"How To Profit From the Bollinger Squeeze","meta_descriptions":["Bollinger bands are used to track the volatility of an asset over time. Learn how to determine the direction of a breakout in a Bollinger Squeeze."],"attrs_boilerpipe_text":"You'd be hard-pressed to find a trader who has never heard of John Bollinger and his namesake bands. Most charting programs include\nBollinger Bands\n. Although these bands are some of the most useful\ntechnical indicators\nif applied properly, they are also among the least understood. One good way to get a handle on how the bands function is to\nread the book\n\"Bollinger on Bollinger Bands,\" in which the man himself explains it all.\nAccording to Bollinger, there's one pattern that raises more questions than any other aspect of Bollinger Bands. He calls it \"the Squeeze.\" As he puts it, his bands, \"are driven by\nvolatility\n, and the Squeeze is a pure reflection of that volatility.\"\nHere we look at the Squeeze and how it can help you identify breakouts.\nKey Takeaways\nBollinger bands show points of high and low volatility for a stock.\nBollinger bands are a series of lines plotted two standard deviations away from the simple moving average of an asset's price.\nBollinger bands are used in combination with other indicators to determine if a breakout is likely, and what direction it will take.\nIf the price is close to the upper bollinger band, that can indicate that the stock is overbought. If it is close to the lower band, it may be oversold.\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\nUnderstanding Bollinger Bands\nA Bollinger Band, as we mentioned above, is a tool used in technical analysis. It is defined by a series of lines that are plotted two\nstandard deviations\n—both positively and negatively—away from the \nsimple moving average (SMA)\nof the price of an asset.\n\nBollinger Bands identify a stock's high and low volatility points.\nWhile it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because\nequities\nalternate between periods of low volatility and high volatility—much like the calm before the storm and the inevitable activity afterward.\nHere is the Squeeze equation:\nBBW\n=\nTBP \n−\n BBP\nSMAC\nwhere:\nBBW\n=\nB\no\nl\nl\ni\nn\ng\ne\nr\nB\na\nn\nd\n®\nwidth\nTBP\n=\nTop \nB\no\nl\nl\ni\nn\ng\ne\nr\nB\na\nn\nd\n®\n(\nthe top 20 periods\n)\nBBP\n=\nBottom \nB\no\nl\nl\ni\nn\ng\ne\nr\nB\na\nn\nd\n®\n(\nthe bottom 20 periods\n)\nSMAC = Simple moving average close\n(the middle 20 periods)\n\\begin{aligned} &\\text{BBW}=\\frac{\\text{TBP }-\\text{ BBP}}{\\text{SMAC}}\\\\ &\\textbf{where:}\\\\ &\\text{BBW} = Bollinger Band ^ {\\circledR} \\text{width}\\\\ &\\text{TBP} = \\text{Top }Bollinger Band ^ {\\circledR} \\left(\\text{the top 20 periods}\\right)\\\\ &\\text{BBP} = \\text{Bottom }Bollinger Band ^ {\\circledR} \\left(\\text{the bottom 20 periods}\\right)\\\\ &\\text{SMAC = Simple moving average close}\\\\ &\\text{(the middle 20 periods)}\\\\ \\end{aligned}\n\nBBW\n=\nSMAC\nTBP \n−\n BBP\n\nwhere:\nBBW\n=\nB\no\nll\nin\ng\ner\nB\nan\nd\n®\nwidth\nTBP\n=\nTop \nB\no\nll\nin\ng\ner\nB\nan\nd\n®\n(\nthe top 20 periods\n)\nBBP\n=\nBottom \nB\no\nll\nin\ng\ner\nB\nan\nd\n®\n(\nthe bottom 20 periods\n)\nSMAC = Simple moving average close\n(the middle 20 periods)\n\nWhen Bollinger Bands are far apart, volatility is high. When they are close together, it is low. A Squeeze is triggered when volatility reaches a six-month low and is identified when Bollinger Bands reach a six-month minimum distance apart.\nImportant\nA Bollinger Squeeze occurs when the top and bottom band reach their minimum distance apart.\nDetermining Breakout Direction\n\nThe next step—deciding which way stocks will go once they break out—is somewhat more challenging. To determine breakout direction, Bollinger suggests that it is necessary to look to other indicators. He suggests using the\nrelative strength index (RSI)\nalong with one or two volume-based indicators such as the\nintraday intensity index\n(developed by David Bostian) or the accumulation\/distribution index (developed by Larry William).\nIf there is a positive\ndivergence\n—that is, if indicators are heading upward while price is heading down or neutral—it is a\nbullish\nsign. For further confirmation, look for volume to build on up days. On the other hand, if price is moving higher but the indicators are showing negative divergence, look for a downside breakout—especially if there have been increasing volume spikes on down days.\nAnother indication of breakout direction is the way the bands move on expansion. When a powerful trend is born, the resulting explosive volatility increase is often so great that the lower band will turn downward in an upside break, or the upper band will turn higher in a downside breakout.\nSee Figure 1 below, showing a Squeeze pattern setting up in the year leading up to a KB Home (\nKBH\n) breakout. Bandwidth reaches a minimum distance apart in May, followed by an explosive breakout to the upside. Note the increasing relative strength index (shown in window 1), along with increasing intraday intensity (the histogram in window 2) and the accumulation\/distribution index (the green line in window 2), both of which (demonstrated by line A) are showing positive divergence with price (demonstrated by line B). Note the volume build that occurred beginning in mid-April through July.\nFigure 1.\nImage by Sabrina Jiang © Investopedia 2021\nThe Head Fake\n\nA third condition to look out for is something Bollinger calls a \"\nhead fake\n.\" It is not unusual for an asset to turn in one direction immediately after the Squeeze, as if to trick traders into thinking the breakout will occur in that direction, only to reverse course and make the true and more significant move in the opposite direction. Traders who act quickly on the breakout get caught offside, which can prove extremely costly if they do not use\nstop-losses\n. Those expecting the head fake can quickly cover their original\nposition\nand enter a trade in the direction of the reversal.\nIn Figure 2, Amazon appeared to be giving a Squeeze setup in early February. Bollinger Bands were at a minimum distance apart, which had not been seen for at least a year, and there is a six-month low bandwidth (see line A in window 2). There is negative divergence between the RSI (line 1 of window 1), the intraday intensity (line 2 of window 2), accumulation\/distribution index (line 3 of window 2), and price (line 4 of window 3)—all of which point to a downward breakout.\nA Squeeze candidate is identified when the bandwidth is at a six-month low value.\nBreaking above the 50-day moving average (the orange line in the lower volume window) on drops in stock price, suggesting a build-up in selling pressure, volume shows above normal values on downside price moves. Finally, the long-term trendline is breached to the downside in the first week of February. A downside breakout would be confirmed by a penetration in the long-term support line (line 5 of window III) and a continued increase in volume on downside moves.\nFigure 2.\nImage by Sabrina Jiang © Investopedia 2021\nThe challenge lies in the fact that the stock had demonstrated a strong uptrend, and one pillar of\ntechnical analysis\nis that the dominant trend will continue until an equal or greater force operates in the opposite direction. This means the stock could very well make a head fake down through the\ntrendline\n, then immediately reverse and break out to the upside. It could also fake out to the upside and break down. While it looks set to break out to the downside along with a trend reversal, one must await confirmation that a trend reversal has taken place and, in case there is a fake-out, be ready to change trade direction at a moment's notice.\nTo Squeeze or Not To Squeeze?\nJust like any other strategy, the Bollinger Squeeze shouldn't be the be-all and end-all of your trading career. Remember, like everything else in the investment world, it does have its limitations. If you follow it too closely and don't consider the risks—and limit them—you could stand to lose. Do your research, take care of your capital, and know when you should make an exit point, if necessary.\nHow Do You Read Bollinger Bands?\nBollinger bands are used to visualize the high and low ranges of a stock's price given recent volatility. If the price of an asset is close to the upper band, that can be a signal that the asset is overbought. Similarly, if the price stays close to the lower band, that can be a sign that it is oversold.\nWhat Is the Best Time Period for Bollinger Bands?\nTraders typically calculate Bollinger bands for the last 20 periods, where a period can be a few minutes, an hour or a day. However it is possible to calculate Bollinger bands for a different number of periods.\nAre Bollinger Bands Reliable?\nWhile Bollinger bands can be used effectively as part of a technical analysis strategy, they can generate false signals. Experts recommend combining them with other indicators to forecast price movements. Even with the best strategy, it is not always possible to predict entry and exit points with 100% accuracy.\nThe Bottom Line\n\nThe Squeeze relies on the premise that stocks constantly experience periods of high volatility followed by low volatility. Equities that are at six-month low levels of volatility, as demonstrated by the narrow distance between Bollinger Bands, generally demonstrate explosive breakouts. By using non-collinear indicators, an investor or trader can determine in which direction the stock is most likely to move in the ensuing breakout. With a little practice using your favorite charting program, you should find the Squeeze a welcome addition to your bag of trading tricks.","attrs_markdown":"\n\n[Skip to content](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp#main)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Trade](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n\n- Please fill out this field.\n- [Newsletters](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp)\n\nPlease fill out this field.\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  News\n  \n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - [Economy](https:\/\/www.investopedia.com\/economic-news-5218422)\n  - 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[Best Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5094943)\n  - [Best Robo-Advisors](https:\/\/www.investopedia.com\/the-best-robo-advisors-8764849)\n  - [Best Personal Loans](https:\/\/www.investopedia.com\/the-best-personal-loans-8761582)\n  - [Best Debt Relief Companies](https:\/\/www.investopedia.com\/the-best-debt-relief-companies-8763179)\n  - [View All](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n\n- Top Stories\n- [Here's the Average Salary for Your Age](https:\/\/www.investopedia.com\/this-is-the-average-salary-for-your-age-see-how-you-compare-11943013)\n- [Warren Buffett Says 'Approximately Right' Beats Precise Mistakes](https:\/\/www.investopedia.com\/warren-buffett-shows-why-favoring-approximately-right-beats-precise-mistakes-for-investors-11941930)\n- [Are You Behind on Your 401(k)? What Millennials Have Saved](https:\/\/www.investopedia.com\/are-you-behind-on-your-401-k-here-s-how-much-millennials-have-saved-11941107)\n- [37 College Majors Reveal Higher Unemployment Rates](https:\/\/www.investopedia.com\/these-37-college-majors-reveal-unemployment-rates-higher-than-all-other-workers-11941188)\n\nTable of Contents\n\nExpand\n\nTable of Contents\n\n- [Understanding Bollinger Bands](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp#toc-understanding-bollinger-bands)\n- [Determining Breakout Direction](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp#toc-determining-breakout-direction)\n- [The Head Fake](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp#toc-the-head-fake)\n- [To Squeeze or Not To Squeeze?](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp#toc-to-squeeze-or-not-to-squeeze)\n- [FAQs](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp#toc-how-do-you-read-bollinger-bands)\n- [The Bottom Line](https:\/\/www.investopedia.com\/articles\/technical\/04\/030304.asp#toc-the-bottom-line)\n\n# How To Profit From the Bollinger Squeeze\nBy\n\n[Matt Blackman, CMT](https:\/\/www.investopedia.com\/contributors\/89\/)\n\n[Full Bio](https:\/\/www.investopedia.com\/contributors\/89\/)\n\nMatt Blackman has 25+ years of experience as a financial writer and 11+ years of expertise as a research analyst; contributes to several publications.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\nUpdated November 17, 2024\n\nReviewed by\n\n[Somer Anderson](https:\/\/www.investopedia.com\/somer-g-anderson-4799773)\n\n![Somer G. Anderson]()\n\n![Somer G. Anderson](https:\/\/www.investopedia.com\/thmb\/9NhSKauxlpJr-xpeTwEkdXZSy5c=\/200x200\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/IMG_7291_Crop-SomerAnderson-fdd793749683441487bbf0bd73328c59.jpg)\n\nReviewed by Somer Anderson\n\n[Full Bio](https:\/\/www.investopedia.com\/somer-g-anderson-4799773)\n\nSomer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas.\n\nLearn about our  [Financial Review Board](https:\/\/www.investopedia.com\/investopedia-financial-review-board-5076269)\n\nFact checked by\n\n[Vikki Velasquez](https:\/\/www.investopedia.com\/vikki-velasquez-5198872)\n\n![Vikkie Velasquez]()\n\n![Vikkie Velasquez](https:\/\/www.investopedia.com\/thmb\/qsiqwN4603qvBBcEmwBBFAZ7h-8=\/200x200\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/vikki-velasquez-investopedia-portrait-1-18b989d75f1f4d6d9b5b3a47cb3ffc5f.jpg)\n\nFact checked by Vikki Velasquez\n\n[Full Bio](https:\/\/www.investopedia.com\/vikki-velasquez-5198872)\n\nVikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\n![Futures traders on the floor of an Exchange. ](https:\/\/www.investopedia.com\/thmb\/iZr1n7KJ7oQkjdMUaaCoLifJMhQ=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/GettyImages-12520901671-08faf48afde74fedada828b1d5b80240.jpg)\n\n![Futures traders on the floor of an Exchange. ](https:\/\/www.investopedia.com\/thmb\/iZr1n7KJ7oQkjdMUaaCoLifJMhQ=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/GettyImages-12520901671-08faf48afde74fedada828b1d5b80240.jpg)\n\n[JOHNNY EGGITT](https:\/\/www.gettyimages.com\/search\/photographer?photographer=JOHNNY%20EGGITT) \/ Getty Images\n\nClose\n\nYou'd be hard-pressed to find a trader who has never heard of John Bollinger and his namesake bands. Most charting programs include [Bollinger Bands](https:\/\/www.investopedia.com\/terms\/b\/bollingerbands.asp). Although these bands are some of the most useful [technical indicators](https:\/\/www.investopedia.com\/terms\/t\/technicalindicator.asp) if applied properly, they are also among the least understood. One good way to get a handle on how the bands function is to [read the book](https:\/\/www.amazon.com\/Bollinger-Bands-John-ebook\/dp\/B000FA5MG2\/r=8-1) \"Bollinger on Bollinger Bands,\" in which the man himself explains it all.\n\nAccording to Bollinger, there's one pattern that raises more questions than any other aspect of Bollinger Bands. He calls it \"the Squeeze.\" As he puts it, his bands, \"are driven by [volatility](https:\/\/www.investopedia.com\/terms\/v\/volatility.asp), and the Squeeze is a pure reflection of that volatility.\"\n\nHere we look at the Squeeze and how it can help you identify breakouts.\n\n### Key Takeaways\n- Bollinger bands show points of high and low volatility for a stock.\n- Bollinger bands are a series of lines plotted two standard deviations away from the simple moving average of an asset's price.\n- Bollinger bands are used in combination with other indicators to determine if a breakout is likely, and what direction it will take.\n- If the price is close to the upper bollinger band, that can indicate that the stock is overbought. If it is close to the lower band, it may be oversold.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nASK\n## Understanding Bollinger Bands\nA Bollinger Band, as we mentioned above, is a tool used in technical analysis. It is defined by a series of lines that are plotted two [standard deviations](https:\/\/www.investopedia.com\/terms\/s\/standarddeviation.asp)—both positively and negatively—away from the [simple moving average (SMA)](https:\/\/www.investopedia.com\/terms\/s\/sma.asp) of the price of an asset.\n\n****Bollinger Bands identify a stock's high and low volatility points. While it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because [equities](https:\/\/www.investopedia.com\/terms\/e\/equity.asp) alternate between periods of low volatility and high volatility—much like the calm before the storm and the inevitable activity afterward.\n\nHere is the Squeeze equation:\n\n> BBW\n> \n> \\=\n> \n> TBP\n> \n> −\n> \n> BBP\n> \n> SMAC\n> \n> where:\n> \n> BBW\n> \n> \\=\n> \n> B\n> \n> o\n> \n> l\n> \n> l\n> \n> i\n> \n> n\n> \n> g\n> \n> e\n> \n> r\n> \n> B\n> \n> a\n> \n> n\n> \n> d\n> \n> ®\n> \n> width\n> \n> TBP\n> \n> \\=\n> \n> Top\n> \n> B\n> \n> o\n> \n> l\n> \n> l\n> \n> i\n> \n> n\n> \n> g\n> \n> e\n> \n> r\n> \n> B\n> \n> a\n> \n> n\n> \n> d\n> \n> ®\n> \n> (\n> \n> the top 20 periods\n> \n> )\n> \n> BBP\n> \n> \\=\n> \n> Bottom\n> \n> B\n> \n> o\n> \n> l\n> \n> l\n> \n> i\n> \n> n\n> \n> g\n> \n> e\n> \n> r\n> \n> B\n> \n> a\n> \n> n\n> \n> d\n> \n> ®\n> \n> (\n> \n> the bottom 20 periods\n> \n> )\n> \n> SMAC = Simple moving average close\n> \n> (the middle 20 periods)\n> \n> \\\\begin{aligned} &\\\\text{BBW}=\\\\frac{\\\\text{TBP }-\\\\text{ BBP}}{\\\\text{SMAC}}\\\\\\\\ &\\\\textbf{where:}\\\\\\\\ &\\\\text{BBW} = Bollinger Band ^ {\\\\circledR} \\\\text{width}\\\\\\\\ &\\\\text{TBP} = \\\\text{Top }Bollinger Band ^ {\\\\circledR} \\\\left(\\\\text{the top 20 periods}\\\\right)\\\\\\\\ &\\\\text{BBP} = \\\\text{Bottom }Bollinger Band ^ {\\\\circledR} \\\\left(\\\\text{the bottom 20 periods}\\\\right)\\\\\\\\ &\\\\text{SMAC = Simple moving average close}\\\\\\\\ &\\\\text{(the middle 20 periods)}\\\\\\\\ \\\\end{aligned}\n> \n> BBW\\=SMACTBP − BBPwhere:BBW\\=BollingerBand®widthTBP\\=Top BollingerBand®(the top 20 periods)BBP\\=Bottom BollingerBand®(the bottom 20 periods)SMAC = Simple moving average close(the middle 20 periods)\n\nWhen Bollinger Bands are far apart, volatility is high. When they are close together, it is low. A Squeeze is triggered when volatility reaches a six-month low and is identified when Bollinger Bands reach a six-month minimum distance apart.\n\n### Important\nA Bollinger Squeeze occurs when the top and bottom band reach their minimum distance apart.\n## Determining Breakout Direction\n****The next step—deciding which way stocks will go once they break out—is somewhat more challenging. To determine breakout direction, Bollinger suggests that it is necessary to look to other indicators. He suggests using the [relative strength index (RSI)](https:\/\/www.investopedia.com\/terms\/r\/rsi.asp) along with one or two volume-based indicators such as the [intraday intensity index](https:\/\/www.investopedia.com\/terms\/i\/intradayintensityindex.asp) (developed by David Bostian) or the accumulation\/distribution index (developed by Larry William).\n\nIf there is a positive [divergence](https:\/\/www.investopedia.com\/terms\/d\/divergence.asp)—that is, if indicators are heading upward while price is heading down or neutral—it is a [bullish](https:\/\/www.investopedia.com\/terms\/b\/bull.asp) sign. For further confirmation, look for volume to build on up days. On the other hand, if price is moving higher but the indicators are showing negative divergence, look for a downside breakout—especially if there have been increasing volume spikes on down days.\n\nAnother indication of breakout direction is the way the bands move on expansion. When a powerful trend is born, the resulting explosive volatility increase is often so great that the lower band will turn downward in an upside break, or the upper band will turn higher in a downside breakout.\n\nSee Figure 1 below, showing a Squeeze pattern setting up in the year leading up to a KB Home ([KBH](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=kbh)) breakout. Bandwidth reaches a minimum distance apart in May, followed by an explosive breakout to the upside. Note the increasing relative strength index (shown in window 1), along with increasing intraday intensity (the histogram in window 2) and the accumulation\/distribution index (the green line in window 2), both of which (demonstrated by line A) are showing positive divergence with price (demonstrated by line B). Note the volume build that occurred beginning in mid-April through July.\n\n![Image]()\n\n![Image](https:\/\/www.investopedia.com\/thmb\/MysK5qRRt-tZvmf04mKs-PdZTVE=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/dotdash_Final_How_to_Profit_From_the_Bollinger_Squeeze_Dec_2020-01-24d71dc0a4e84ef983ceccbba10d8ff3.jpg)\n\nFigure 1. Image by Sabrina Jiang © Investopedia 2021\n## The Head Fake\n****A third condition to look out for is something Bollinger calls a \"[head fake](https:\/\/www.investopedia.com\/terms\/h\/headfake-trade.asp).\" It is not unusual for an asset to turn in one direction immediately after the Squeeze, as if to trick traders into thinking the breakout will occur in that direction, only to reverse course and make the true and more significant move in the opposite direction. Traders who act quickly on the breakout get caught offside, which can prove extremely costly if they do not use [stop-losses](https:\/\/www.investopedia.com\/terms\/s\/stop-lossorder.asp). Those expecting the head fake can quickly cover their original [position](https:\/\/www.investopedia.com\/terms\/p\/position.asp) and enter a trade in the direction of the reversal.\n\nIn Figure 2, Amazon appeared to be giving a Squeeze setup in early February. Bollinger Bands were at a minimum distance apart, which had not been seen for at least a year, and there is a six-month low bandwidth (see line A in window 2). There is negative divergence between the RSI (line 1 of window 1), the intraday intensity (line 2 of window 2), accumulation\/distribution index (line 3 of window 2), and price (line 4 of window 3)—all of which point to a downward breakout.\n\nA Squeeze candidate is identified when the bandwidth is at a six-month low value.\n\nBreaking above the 50-day moving average (the orange line in the lower volume window) on drops in stock price, suggesting a build-up in selling pressure, volume shows above normal values on downside price moves. Finally, the long-term trendline is breached to the downside in the first week of February. A downside breakout would be confirmed by a penetration in the long-term support line (line 5 of window III) and a continued increase in volume on downside moves.\n\n![Image]()\n\n![Image](https:\/\/www.investopedia.com\/thmb\/ArfFrIi6ud0V5hjfytmIqEMo3yE=\/1500x0\/filters:no_upscale\\(\\):max_bytes\\(150000\\):strip_icc\\(\\)\/dotdash_Fianl_How_to_Profit_From_the_Bollinger_Squeeze_Dec_2020-02-6dd17c67cac64ff9b754a22e06bc11ac.jpg)\n\nFigure 2. Image by Sabrina Jiang © Investopedia 2021\n\nThe challenge lies in the fact that the stock had demonstrated a strong uptrend, and one pillar of [technical analysis](https:\/\/www.investopedia.com\/terms\/t\/technicalanalysis.asp) is that the dominant trend will continue until an equal or greater force operates in the opposite direction. This means the stock could very well make a head fake down through the [trendline](https:\/\/www.investopedia.com\/terms\/t\/trendline.asp), then immediately reverse and break out to the upside. It could also fake out to the upside and break down. While it looks set to break out to the downside along with a trend reversal, one must await confirmation that a trend reversal has taken place and, in case there is a fake-out, be ready to change trade direction at a moment's notice.\n\n## To Squeeze or Not To Squeeze?\nJust like any other strategy, the Bollinger Squeeze shouldn't be the be-all and end-all of your trading career. Remember, like everything else in the investment world, it does have its limitations. If you follow it too closely and don't consider the risks—and limit them—you could stand to lose. Do your research, take care of your capital, and know when you should make an exit point, if necessary.\n\n## How Do You Read Bollinger Bands?\nBollinger bands are used to visualize the high and low ranges of a stock's price given recent volatility. If the price of an asset is close to the upper band, that can be a signal that the asset is overbought. Similarly, if the price stays close to the lower band, that can be a sign that it is oversold.\n\n## What Is the Best Time Period for Bollinger Bands?\nTraders typically calculate Bollinger bands for the last 20 periods, where a period can be a few minutes, an hour or a day. However it is possible to calculate Bollinger bands for a different number of periods.\n\n## Are Bollinger Bands Reliable?\nWhile Bollinger bands can be used effectively as part of a technical analysis strategy, they can generate false signals. Experts recommend combining them with other indicators to forecast price movements. Even with the best strategy, it is not always possible to predict entry and exit points with 100% accuracy.\n## The Bottom Line\n****The Squeeze relies on the premise that stocks constantly experience periods of high volatility followed by low volatility. Equities that are at six-month low levels of volatility, as demonstrated by the narrow distance between Bollinger Bands, generally demonstrate explosive breakouts. By using non-collinear indicators, an investor or trader can determine in which direction the stock is most likely to move in the ensuing breakout. With a little practice using your favorite charting program, you should find the Squeeze a welcome addition to your bag of trading tricks.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nASK\n\nArticle Sources\n\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https:\/\/www.investopedia.com\/legal-4768893#EditorialPolicy)\n\n1. John Bollinger. “[Bollinger on Bollinger Bands](https:\/\/www.google.com\/books\/edition\/Bollinger_on_Bollinger_Bands\/MVrJdo8VOnIC?hl=en&gbpv=0).” McGraw Hill, 2001.\n2. Bollinger Bands. \"[Bollinger Bands Rules](https:\/\/www.bollingerbands.com\/bollinger-band-rules).\"\n3. Charles Schwab. “[Bollinger Bands: What They Are and How To Use Them](https:\/\/www.schwab.com\/learn\/story\/bollinger-bands-what-they-are-and-how-to-use-them).”\n4. StockCharts. “[Bollinger Band Squeeze](https:\/\/chartschool.stockcharts.com\/table-of-contents\/trading-strategies-and-models\/trading-strategies\/bollinger-band-squeeze#bollinger_band_squeeze1).” *Head Fake.*\n5. Charles Schwab. \"[Bollinger Bands: What They Are and How to Use Them](https:\/\/www.schwab.com\/learn\/story\/bollinger-bands-what-they-are-and-how-to-use-them).\"\n\nRead more\n\n- [Trading](https:\/\/www.investopedia.com\/trading-4427765)\n- [Technical Analysis](https:\/\/www.investopedia.com\/technical-analysis-4689657)\n- [Technical Analysis Basic Education](https:\/\/www.investopedia.com\/technical-analysis-basic-education-4689655)\n\nPartner Links\n\nTake the Next Step to Invest\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. 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Most charting programs include [Bollinger Bands](https:\/\/www.investopedia.com\/terms\/b\/bollingerbands.asp). Although these bands are some of the most useful [technical indicators](https:\/\/www.investopedia.com\/terms\/t\/technicalindicator.asp) if applied properly, they are also among the least understood. One good way to get a handle on how the bands function is to [read the book](https:\/\/www.amazon.com\/Bollinger-Bands-John-ebook\/dp\/B000FA5MG2\/r=8-1) \"Bollinger on Bollinger Bands,\" in which the man himself explains it all.\n\nAccording to Bollinger, there's one pattern that raises more questions than any other aspect of Bollinger Bands. He calls it \"the Squeeze.\" As he puts it, his bands, \"are driven by [volatility](https:\/\/www.investopedia.com\/terms\/v\/volatility.asp), and the Squeeze is a pure reflection of that volatility.\"\n\nHere we look at the Squeeze and how it can help you identify breakouts.\n\n### Key Takeaways\n- Bollinger bands show points of high and low volatility for a stock.\n- Bollinger bands are a series of lines plotted two standard deviations away from the simple moving average of an asset's price.\n- Bollinger bands are used in combination with other indicators to determine if a breakout is likely, and what direction it will take.\n- If the price is close to the upper bollinger band, that can indicate that the stock is overbought. If it is close to the lower band, it may be oversold.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n## Understanding Bollinger Bands\nA Bollinger Band, as we mentioned above, is a tool used in technical analysis. It is defined by a series of lines that are plotted two [standard deviations](https:\/\/www.investopedia.com\/terms\/s\/standarddeviation.asp)—both positively and negatively—away from the [simple moving average (SMA)](https:\/\/www.investopedia.com\/terms\/s\/sma.asp) of the price of an asset.\n\n****Bollinger Bands identify a stock's high and low volatility points. While it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because [equities](https:\/\/www.investopedia.com\/terms\/e\/equity.asp) alternate between periods of low volatility and high volatility—much like the calm before the storm and the inevitable activity afterward.\n\nHere is the Squeeze equation:\n\n> BBW\n> \n> \\=\n> \n> TBP\n> \n> −\n> \n> BBP\n> \n> SMAC\n> \n> where:\n> \n> BBW\n> \n> \\=\n> \n> B\n> \n> o\n> \n> l\n> \n> l\n> \n> i\n> \n> n\n> \n> g\n> \n> e\n> \n> r\n> \n> B\n> \n> a\n> \n> n\n> \n> d\n> \n> ®\n> \n> width\n> \n> TBP\n> \n> \\=\n> \n> Top\n> \n> B\n> \n> o\n> \n> l\n> \n> l\n> \n> i\n> \n> n\n> \n> g\n> \n> e\n> \n> r\n> \n> B\n> \n> a\n> \n> n\n> \n> d\n> \n> ®\n> \n> (\n> \n> the top 20 periods\n> \n> )\n> \n> BBP\n> \n> \\=\n> \n> Bottom\n> \n> B\n> \n> o\n> \n> l\n> \n> l\n> \n> i\n> \n> n\n> \n> g\n> \n> e\n> \n> r\n> \n> B\n> \n> a\n> \n> n\n> \n> d\n> \n> ®\n> \n> (\n> \n> the bottom 20 periods\n> \n> )\n> \n> SMAC = Simple moving average close\n> \n> (the middle 20 periods)\n> \n> \\\\begin{aligned} &\\\\text{BBW}=\\\\frac{\\\\text{TBP }-\\\\text{ BBP}}{\\\\text{SMAC}}\\\\\\\\ &\\\\textbf{where:}\\\\\\\\ &\\\\text{BBW} = Bollinger Band ^ {\\\\circledR} \\\\text{width}\\\\\\\\ &\\\\text{TBP} = \\\\text{Top }Bollinger Band ^ {\\\\circledR} \\\\left(\\\\text{the top 20 periods}\\\\right)\\\\\\\\ &\\\\text{BBP} = \\\\text{Bottom }Bollinger Band ^ {\\\\circledR} \\\\left(\\\\text{the bottom 20 periods}\\\\right)\\\\\\\\ &\\\\text{SMAC = Simple moving average close}\\\\\\\\ &\\\\text{(the middle 20 periods)}\\\\\\\\ \\\\end{aligned}\n> \n> BBW\\=SMACTBP − BBPwhere:BBW\\=BollingerBand®widthTBP\\=Top BollingerBand®(the top 20 periods)BBP\\=Bottom BollingerBand®(the bottom 20 periods)SMAC = Simple moving average close(the middle 20 periods)\n\nWhen Bollinger Bands are far apart, volatility is high. When they are close together, it is low. A Squeeze is triggered when volatility reaches a six-month low and is identified when Bollinger Bands reach a six-month minimum distance apart.\n\n### Important\nA Bollinger Squeeze occurs when the top and bottom band reach their minimum distance apart.\n## Determining Breakout Direction\n****The next step—deciding which way stocks will go once they break out—is somewhat more challenging. To determine breakout direction, Bollinger suggests that it is necessary to look to other indicators. He suggests using the [relative strength index (RSI)](https:\/\/www.investopedia.com\/terms\/r\/rsi.asp) along with one or two volume-based indicators such as the [intraday intensity index](https:\/\/www.investopedia.com\/terms\/i\/intradayintensityindex.asp) (developed by David Bostian) or the accumulation\/distribution index (developed by Larry William).\n\nIf there is a positive [divergence](https:\/\/www.investopedia.com\/terms\/d\/divergence.asp)—that is, if indicators are heading upward while price is heading down or neutral—it is a [bullish](https:\/\/www.investopedia.com\/terms\/b\/bull.asp) sign. For further confirmation, look for volume to build on up days. On the other hand, if price is moving higher but the indicators are showing negative divergence, look for a downside breakout—especially if there have been increasing volume spikes on down days.\n\nAnother indication of breakout direction is the way the bands move on expansion. When a powerful trend is born, the resulting explosive volatility increase is often so great that the lower band will turn downward in an upside break, or the upper band will turn higher in a downside breakout.\n\nSee Figure 1 below, showing a Squeeze pattern setting up in the year leading up to a KB Home ([KBH](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=kbh)) breakout. Bandwidth reaches a minimum distance apart in May, followed by an explosive breakout to the upside. Note the increasing relative strength index (shown in window 1), along with increasing intraday intensity (the histogram in window 2) and the accumulation\/distribution index (the green line in window 2), both of which (demonstrated by line A) are showing positive divergence with price (demonstrated by line B). Note the volume build that occurred beginning in mid-April through July.\n\nFigure 1. Image by Sabrina Jiang © Investopedia 2021\n\n## The Head Fake\n****A third condition to look out for is something Bollinger calls a \"[head fake](https:\/\/www.investopedia.com\/terms\/h\/headfake-trade.asp).\" It is not unusual for an asset to turn in one direction immediately after the Squeeze, as if to trick traders into thinking the breakout will occur in that direction, only to reverse course and make the true and more significant move in the opposite direction. Traders who act quickly on the breakout get caught offside, which can prove extremely costly if they do not use [stop-losses](https:\/\/www.investopedia.com\/terms\/s\/stop-lossorder.asp). Those expecting the head fake can quickly cover their original [position](https:\/\/www.investopedia.com\/terms\/p\/position.asp) and enter a trade in the direction of the reversal.\n\nIn Figure 2, Amazon appeared to be giving a Squeeze setup in early February. Bollinger Bands were at a minimum distance apart, which had not been seen for at least a year, and there is a six-month low bandwidth (see line A in window 2). There is negative divergence between the RSI (line 1 of window 1), the intraday intensity (line 2 of window 2), accumulation\/distribution index (line 3 of window 2), and price (line 4 of window 3)—all of which point to a downward breakout.\n\nA Squeeze candidate is identified when the bandwidth is at a six-month low value.\n\nBreaking above the 50-day moving average (the orange line in the lower volume window) on drops in stock price, suggesting a build-up in selling pressure, volume shows above normal values on downside price moves. Finally, the long-term trendline is breached to the downside in the first week of February. A downside breakout would be confirmed by a penetration in the long-term support line (line 5 of window III) and a continued increase in volume on downside moves.\n\nFigure 2. Image by Sabrina Jiang © Investopedia 2021\n\nThe challenge lies in the fact that the stock had demonstrated a strong uptrend, and one pillar of [technical analysis](https:\/\/www.investopedia.com\/terms\/t\/technicalanalysis.asp) is that the dominant trend will continue until an equal or greater force operates in the opposite direction. This means the stock could very well make a head fake down through the [trendline](https:\/\/www.investopedia.com\/terms\/t\/trendline.asp), then immediately reverse and break out to the upside. It could also fake out to the upside and break down. While it looks set to break out to the downside along with a trend reversal, one must await confirmation that a trend reversal has taken place and, in case there is a fake-out, be ready to change trade direction at a moment's notice.\n\n## To Squeeze or Not To Squeeze?\nJust like any other strategy, the Bollinger Squeeze shouldn't be the be-all and end-all of your trading career. Remember, like everything else in the investment world, it does have its limitations. If you follow it too closely and don't consider the risks—and limit them—you could stand to lose. Do your research, take care of your capital, and know when you should make an exit point, if necessary.\n\n## How Do You Read Bollinger Bands?\nBollinger bands are used to visualize the high and low ranges of a stock's price given recent volatility. If the price of an asset is close to the upper band, that can be a signal that the asset is overbought. Similarly, if the price stays close to the lower band, that can be a sign that it is oversold.\n\n## What Is the Best Time Period for Bollinger Bands?\nTraders typically calculate Bollinger bands for the last 20 periods, where a period can be a few minutes, an hour or a day. However it is possible to calculate Bollinger bands for a different number of periods.\n\n## Are Bollinger Bands Reliable?\nWhile Bollinger bands can be used effectively as part of a technical analysis strategy, they can generate false signals. Experts recommend combining them with other indicators to forecast price movements. Even with the best strategy, it is not always possible to predict entry and exit points with 100% accuracy.\n## The Bottom Line\n****The Squeeze relies on the premise that stocks constantly experience periods of high volatility followed by low volatility. Equities that are at six-month low levels of volatility, as demonstrated by the narrow distance between Bollinger Bands, generally demonstrate explosive breakouts. By using non-collinear indicators, an investor or trader can determine in which direction the stock is most likely to move in the ensuing breakout. With a little practice using your favorite charting program, you should find the Squeeze a welcome addition to your bag of trading tricks.","meta_canonical":null}

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Boilerpipe Text	You'd be hard-pressed to find a trader who has never heard of John Bollinger and his namesake bands. Most charting programs include Bollinger Bands . Although these bands are some of the most useful technical indicators if applied properly, they are also among the least understood. One good way to get a handle on how the bands function is to read the book "Bollinger on Bollinger Bands," in which the man himself explains it all. According to Bollinger, there's one pattern that raises more questions than any other aspect of Bollinger Bands. He calls it "the Squeeze." As he puts it, his bands, "are driven by volatility , and the Squeeze is a pure reflection of that volatility." Here we look at the Squeeze and how it can help you identify breakouts. Key Takeaways Bollinger bands show points of high and low volatility for a stock. Bollinger bands are a series of lines plotted two standard deviations away from the simple moving average of an asset's price. Bollinger bands are used in combination with other indicators to determine if a breakout is likely, and what direction it will take. If the price is close to the upper bollinger band, that can indicate that the stock is overbought. If it is close to the lower band, it may be oversold. Get personalized, AI-powered answers built on 27+ years of trusted expertise. Understanding Bollinger Bands A Bollinger Band, as we mentioned above, is a tool used in technical analysis. It is defined by a series of lines that are plotted two standard deviations —both positively and negatively—away from the simple moving average (SMA) of the price of an asset. Bollinger Bands identify a stock's high and low volatility points. While it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because equities alternate between periods of low volatility and high volatility—much like the calm before the storm and the inevitable activity afterward. Here is the Squeeze equation: BBW = TBP − BBP SMAC where: BBW = B o l l i n g e r B a n d ® width TBP = Top B o l l i n g e r B a n d ® ( the top 20 periods ) BBP = Bottom B o l l i n g e r B a n d ® ( the bottom 20 periods ) SMAC = Simple moving average close (the middle 20 periods) \begin{aligned} &\text{BBW}=\frac{\text{TBP }-\text{ BBP}}{\text{SMAC}}\\ &\textbf{where:}\\ &\text{BBW} = Bollinger Band ^ {\circledR} \text{width}\\ &\text{TBP} = \text{Top }Bollinger Band ^ {\circledR} \left(\text{the top 20 periods}\right)\\ &\text{BBP} = \text{Bottom }Bollinger Band ^ {\circledR} \left(\text{the bottom 20 periods}\right)\\ &\text{SMAC = Simple moving average close}\\ &\text{(the middle 20 periods)}\\ \end{aligned} BBW = SMAC TBP − BBP where: BBW = B o ll in g er B an d ® width TBP = Top B o ll in g er B an d ® ( the top 20 periods ) BBP = Bottom B o ll in g er B an d ® ( the bottom 20 periods ) SMAC = Simple moving average close (the middle 20 periods) When Bollinger Bands are far apart, volatility is high. When they are close together, it is low. A Squeeze is triggered when volatility reaches a six-month low and is identified when Bollinger Bands reach a six-month minimum distance apart. Important A Bollinger Squeeze occurs when the top and bottom band reach their minimum distance apart. Determining Breakout Direction The next step—deciding which way stocks will go once they break out—is somewhat more challenging. To determine breakout direction, Bollinger suggests that it is necessary to look to other indicators. He suggests using the relative strength index (RSI) along with one or two volume-based indicators such as the intraday intensity index (developed by David Bostian) or the accumulation/distribution index (developed by Larry William). If there is a positive divergence —that is, if indicators are heading upward while price is heading down or neutral—it is a bullish sign. For further confirmation, look for volume to build on up days. On the other hand, if price is moving higher but the indicators are showing negative divergence, look for a downside breakout—especially if there have been increasing volume spikes on down days. Another indication of breakout direction is the way the bands move on expansion. When a powerful trend is born, the resulting explosive volatility increase is often so great that the lower band will turn downward in an upside break, or the upper band will turn higher in a downside breakout. See Figure 1 below, showing a Squeeze pattern setting up in the year leading up to a KB Home ( KBH ) breakout. Bandwidth reaches a minimum distance apart in May, followed by an explosive breakout to the upside. Note the increasing relative strength index (shown in window 1), along with increasing intraday intensity (the histogram in window 2) and the accumulation/distribution index (the green line in window 2), both of which (demonstrated by line A) are showing positive divergence with price (demonstrated by line B). Note the volume build that occurred beginning in mid-April through July. Figure 1. Image by Sabrina Jiang © Investopedia 2021 The Head Fake A third condition to look out for is something Bollinger calls a " head fake ." It is not unusual for an asset to turn in one direction immediately after the Squeeze, as if to trick traders into thinking the breakout will occur in that direction, only to reverse course and make the true and more significant move in the opposite direction. Traders who act quickly on the breakout get caught offside, which can prove extremely costly if they do not use stop-losses . Those expecting the head fake can quickly cover their original position and enter a trade in the direction of the reversal. In Figure 2, Amazon appeared to be giving a Squeeze setup in early February. Bollinger Bands were at a minimum distance apart, which had not been seen for at least a year, and there is a six-month low bandwidth (see line A in window 2). There is negative divergence between the RSI (line 1 of window 1), the intraday intensity (line 2 of window 2), accumulation/distribution index (line 3 of window 2), and price (line 4 of window 3)—all of which point to a downward breakout. A Squeeze candidate is identified when the bandwidth is at a six-month low value. Breaking above the 50-day moving average (the orange line in the lower volume window) on drops in stock price, suggesting a build-up in selling pressure, volume shows above normal values on downside price moves. Finally, the long-term trendline is breached to the downside in the first week of February. A downside breakout would be confirmed by a penetration in the long-term support line (line 5 of window III) and a continued increase in volume on downside moves. Figure 2. Image by Sabrina Jiang © Investopedia 2021 The challenge lies in the fact that the stock had demonstrated a strong uptrend, and one pillar of technical analysis is that the dominant trend will continue until an equal or greater force operates in the opposite direction. This means the stock could very well make a head fake down through the trendline , then immediately reverse and break out to the upside. It could also fake out to the upside and break down. While it looks set to break out to the downside along with a trend reversal, one must await confirmation that a trend reversal has taken place and, in case there is a fake-out, be ready to change trade direction at a moment's notice. To Squeeze or Not To Squeeze? Just like any other strategy, the Bollinger Squeeze shouldn't be the be-all and end-all of your trading career. Remember, like everything else in the investment world, it does have its limitations. If you follow it too closely and don't consider the risks—and limit them—you could stand to lose. Do your research, take care of your capital, and know when you should make an exit point, if necessary. How Do You Read Bollinger Bands? Bollinger bands are used to visualize the high and low ranges of a stock's price given recent volatility. If the price of an asset is close to the upper band, that can be a signal that the asset is overbought. Similarly, if the price stays close to the lower band, that can be a sign that it is oversold. What Is the Best Time Period for Bollinger Bands? Traders typically calculate Bollinger bands for the last 20 periods, where a period can be a few minutes, an hour or a day. However it is possible to calculate Bollinger bands for a different number of periods. Are Bollinger Bands Reliable? While Bollinger bands can be used effectively as part of a technical analysis strategy, they can generate false signals. Experts recommend combining them with other indicators to forecast price movements. Even with the best strategy, it is not always possible to predict entry and exit points with 100% accuracy. The Bottom Line The Squeeze relies on the premise that stocks constantly experience periods of high volatility followed by low volatility. Equities that are at six-month low levels of volatility, as demonstrated by the narrow distance between Bollinger Bands, generally demonstrate explosive breakouts. By using non-collinear indicators, an investor or trader can determine in which direction the stock is most likely to move in the ensuing breakout. With a little practice using your favorite charting program, you should find the Squeeze a welcome addition to your bag of trading tricks.
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Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) Updated November 17, 2024 Reviewed by [Somer Anderson](https://www.investopedia.com/somer-g-anderson-4799773) ![Somer G. Anderson]() ![Somer G. Anderson](https://www.investopedia.com/thmb/9NhSKauxlpJr-xpeTwEkdXZSy5c=/200x200/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/IMG_7291_Crop-SomerAnderson-fdd793749683441487bbf0bd73328c59.jpg) Reviewed by Somer Anderson [Full Bio](https://www.investopedia.com/somer-g-anderson-4799773) Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. Learn about our [Financial Review Board](https://www.investopedia.com/investopedia-financial-review-board-5076269) Fact checked by [Vikki Velasquez](https://www.investopedia.com/vikki-velasquez-5198872) ![Vikkie Velasquez]() ![Vikkie Velasquez](https://www.investopedia.com/thmb/qsiqwN4603qvBBcEmwBBFAZ7h-8=/200x200/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/vikki-velasquez-investopedia-portrait-1-18b989d75f1f4d6d9b5b3a47cb3ffc5f.jpg) Fact checked by Vikki Velasquez [Full Bio](https://www.investopedia.com/vikki-velasquez-5198872) Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) ![Futures traders on the floor of an Exchange. ](https://www.investopedia.com/thmb/iZr1n7KJ7oQkjdMUaaCoLifJMhQ=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/GettyImages-12520901671-08faf48afde74fedada828b1d5b80240.jpg) ![Futures traders on the floor of an Exchange. ](https://www.investopedia.com/thmb/iZr1n7KJ7oQkjdMUaaCoLifJMhQ=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/GettyImages-12520901671-08faf48afde74fedada828b1d5b80240.jpg) [JOHNNY EGGITT](https://www.gettyimages.com/search/photographer?photographer=JOHNNY%20EGGITT) / Getty Images Close You'd be hard-pressed to find a trader who has never heard of John Bollinger and his namesake bands. Most charting programs include [Bollinger Bands](https://www.investopedia.com/terms/b/bollingerbands.asp). Although these bands are some of the most useful [technical indicators](https://www.investopedia.com/terms/t/technicalindicator.asp) if applied properly, they are also among the least understood. One good way to get a handle on how the bands function is to [read the book](https://www.amazon.com/Bollinger-Bands-John-ebook/dp/B000FA5MG2/r=8-1) "Bollinger on Bollinger Bands," in which the man himself explains it all. According to Bollinger, there's one pattern that raises more questions than any other aspect of Bollinger Bands. He calls it "the Squeeze." As he puts it, his bands, "are driven by [volatility](https://www.investopedia.com/terms/v/volatility.asp), and the Squeeze is a pure reflection of that volatility." Here we look at the Squeeze and how it can help you identify breakouts. ### Key Takeaways - Bollinger bands show points of high and low volatility for a stock. - Bollinger bands are a series of lines plotted two standard deviations away from the simple moving average of an asset's price. - Bollinger bands are used in combination with other indicators to determine if a breakout is likely, and what direction it will take. - If the price is close to the upper bollinger band, that can indicate that the stock is overbought. If it is close to the lower band, it may be oversold. Get personalized, AI-powered answers built on 27+ years of trusted expertise. ASK ## Understanding Bollinger Bands A Bollinger Band, as we mentioned above, is a tool used in technical analysis. It is defined by a series of lines that are plotted two [standard deviations](https://www.investopedia.com/terms/s/standarddeviation.asp)—both positively and negatively—away from the [simple moving average (SMA)](https://www.investopedia.com/terms/s/sma.asp) of the price of an asset. **Bollinger Bands identify a stock's high and low volatility points. While it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because [equities](https://www.investopedia.com/terms/e/equity.asp) alternate between periods of low volatility and high volatility—much like the calm before the storm and the inevitable activity afterward. Here is the Squeeze equation: > BBW > > \= > > TBP > > − > > BBP > > SMAC > > where: > > BBW > > \= > > B > > o > > l > > l > > i > > n > > g > > e > > r > > B > > a > > n > > d > > ® > > width > > TBP > > \= > > Top > > B > > o > > l > > l > > i > > n > > g > > e > > r > > B > > a > > n > > d > > ® > > ( > > the top 20 periods > > ) > > BBP > > \= > > Bottom > > B > > o > > l > > l > > i > > n > > g > > e > > r > > B > > a > > n > > d > > ® > > ( > > the bottom 20 periods > > ) > > SMAC = Simple moving average close > > (the middle 20 periods) > > \\begin{aligned} &\\text{BBW}=\\frac{\\text{TBP }-\\text{ BBP}}{\\text{SMAC}}\\\\ &\\textbf{where:}\\\\ &\\text{BBW} = Bollinger Band ^ {\\circledR} \\text{width}\\\\ &\\text{TBP} = \\text{Top }Bollinger Band ^ {\\circledR} \\left(\\text{the top 20 periods}\\right)\\\\ &\\text{BBP} = \\text{Bottom }Bollinger Band ^ {\\circledR} \\left(\\text{the bottom 20 periods}\\right)\\\\ &\\text{SMAC = Simple moving average close}\\\\ &\\text{(the middle 20 periods)}\\\\ \\end{aligned} > > BBW\=SMACTBP − BBPwhere:BBW\=BollingerBand®widthTBP\=Top BollingerBand®(the top 20 periods)BBP\=Bottom BollingerBand®(the bottom 20 periods)SMAC = Simple moving average close(the middle 20 periods) When Bollinger Bands are far apart, volatility is high. When they are close together, it is low. A Squeeze is triggered when volatility reaches a six-month low and is identified when Bollinger Bands reach a six-month minimum distance apart. ### Important A Bollinger Squeeze occurs when the top and bottom band reach their minimum distance apart. ## Determining Breakout Direction The next step—deciding which way stocks will go once they break out—is somewhat more challenging. To determine breakout direction, Bollinger suggests that it is necessary to look to other indicators. He suggests using the [relative strength index (RSI)](https://www.investopedia.com/terms/r/rsi.asp) along with one or two volume-based indicators such as the [intraday intensity index](https://www.investopedia.com/terms/i/intradayintensityindex.asp) (developed by David Bostian) or the accumulation/distribution index (developed by Larry William). If there is a positive [divergence](https://www.investopedia.com/terms/d/divergence.asp)—that is, if indicators are heading upward while price is heading down or neutral—it is a [bullish](https://www.investopedia.com/terms/b/bull.asp) sign. For further confirmation, look for volume to build on up days. On the other hand, if price is moving higher but the indicators are showing negative divergence, look for a downside breakout—especially if there have been increasing volume spikes on down days. Another indication of breakout direction is the way the bands move on expansion. When a powerful trend is born, the resulting explosive volatility increase is often so great that the lower band will turn downward in an upside break, or the upper band will turn higher in a downside breakout. See Figure 1 below, showing a Squeeze pattern setting up in the year leading up to a KB Home ([KBH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=kbh)) breakout. Bandwidth reaches a minimum distance apart in May, followed by an explosive breakout to the upside. Note the increasing relative strength index (shown in window 1), along with increasing intraday intensity (the histogram in window 2) and the accumulation/distribution index (the green line in window 2), both of which (demonstrated by line A) are showing positive divergence with price (demonstrated by line B). Note the volume build that occurred beginning in mid-April through July. ![Image]() ![Image](https://www.investopedia.com/thmb/MysK5qRRt-tZvmf04mKs-PdZTVE=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/dotdash_Final_How_to_Profit_From_the_Bollinger_Squeeze_Dec_2020-01-24d71dc0a4e84ef983ceccbba10d8ff3.jpg) Figure 1. Image by Sabrina Jiang © Investopedia 2021 ## The Head Fake A third condition to look out for is something Bollinger calls a "[head fake](https://www.investopedia.com/terms/h/headfake-trade.asp)." It is not unusual for an asset to turn in one direction immediately after the Squeeze, as if to trick traders into thinking the breakout will occur in that direction, only to reverse course and make the true and more significant move in the opposite direction. Traders who act quickly on the breakout get caught offside, which can prove extremely costly if they do not use [stop-losses](https://www.investopedia.com/terms/s/stop-lossorder.asp). Those expecting the head fake can quickly cover their original [position](https://www.investopedia.com/terms/p/position.asp) and enter a trade in the direction of the reversal. In Figure 2, Amazon appeared to be giving a Squeeze setup in early February. Bollinger Bands were at a minimum distance apart, which had not been seen for at least a year, and there is a six-month low bandwidth (see line A in window 2). There is negative divergence between the RSI (line 1 of window 1), the intraday intensity (line 2 of window 2), accumulation/distribution index (line 3 of window 2), and price (line 4 of window 3)—all of which point to a downward breakout. A Squeeze candidate is identified when the bandwidth is at a six-month low value. Breaking above the 50-day moving average (the orange line in the lower volume window) on drops in stock price, suggesting a build-up in selling pressure, volume shows above normal values on downside price moves. Finally, the long-term trendline is breached to the downside in the first week of February. A downside breakout would be confirmed by a penetration in the long-term support line (line 5 of window III) and a continued increase in volume on downside moves. ![Image]() ![Image](https://www.investopedia.com/thmb/ArfFrIi6ud0V5hjfytmIqEMo3yE=/1500x0/filters:no_upscale\(\):max_bytes\(150000\):strip_icc\(\)/dotdash_Fianl_How_to_Profit_From_the_Bollinger_Squeeze_Dec_2020-02-6dd17c67cac64ff9b754a22e06bc11ac.jpg) Figure 2. Image by Sabrina Jiang © Investopedia 2021 The challenge lies in the fact that the stock had demonstrated a strong uptrend, and one pillar of [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) is that the dominant trend will continue until an equal or greater force operates in the opposite direction. This means the stock could very well make a head fake down through the [trendline](https://www.investopedia.com/terms/t/trendline.asp), then immediately reverse and break out to the upside. It could also fake out to the upside and break down. While it looks set to break out to the downside along with a trend reversal, one must await confirmation that a trend reversal has taken place and, in case there is a fake-out, be ready to change trade direction at a moment's notice. ## To Squeeze or Not To Squeeze? Just like any other strategy, the Bollinger Squeeze shouldn't be the be-all and end-all of your trading career. Remember, like everything else in the investment world, it does have its limitations. If you follow it too closely and don't consider the risks—and limit them—you could stand to lose. Do your research, take care of your capital, and know when you should make an exit point, if necessary. ## How Do You Read Bollinger Bands? Bollinger bands are used to visualize the high and low ranges of a stock's price given recent volatility. If the price of an asset is close to the upper band, that can be a signal that the asset is overbought. Similarly, if the price stays close to the lower band, that can be a sign that it is oversold. ## What Is the Best Time Period for Bollinger Bands? Traders typically calculate Bollinger bands for the last 20 periods, where a period can be a few minutes, an hour or a day. However it is possible to calculate Bollinger bands for a different number of periods. ## Are Bollinger Bands Reliable? While Bollinger bands can be used effectively as part of a technical analysis strategy, they can generate false signals. Experts recommend combining them with other indicators to forecast price movements. Even with the best strategy, it is not always possible to predict entry and exit points with 100% accuracy. ## The Bottom Line *The Squeeze relies on the premise that stocks constantly experience periods of high volatility followed by low volatility. Equities that are at six-month low levels of volatility, as demonstrated by the narrow distance between Bollinger Bands, generally demonstrate explosive breakouts. By using non-collinear indicators, an investor or trader can determine in which direction the stock is most likely to move in the ensuing breakout. With a little practice using your favorite charting program, you should find the Squeeze a welcome addition to your bag of trading tricks. Get personalized, AI-powered answers built on 27+ years of trusted expertise. ASK Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. John Bollinger. “[Bollinger on Bollinger Bands](https://www.google.com/books/edition/Bollinger_on_Bollinger_Bands/MVrJdo8VOnIC?hl=en&gbpv=0).” McGraw Hill, 2001. 2. Bollinger Bands. "[Bollinger Bands Rules](https://www.bollingerbands.com/bollinger-band-rules)." 3. Charles Schwab. “[Bollinger Bands: What They Are and How To Use Them](https://www.schwab.com/learn/story/bollinger-bands-what-they-are-and-how-to-use-them).” 4. StockCharts. “[Bollinger Band Squeeze](https://chartschool.stockcharts.com/table-of-contents/trading-strategies-and-models/trading-strategies/bollinger-band-squeeze#bollinger_band_squeeze1).” Head Fake.* 5. Charles Schwab. "[Bollinger Bands: What They Are and How to Use Them](https://www.schwab.com/learn/story/bollinger-bands-what-they-are-and-how-to-use-them)." 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Readable Markdown	You'd be hard-pressed to find a trader who has never heard of John Bollinger and his namesake bands. Most charting programs include [Bollinger Bands](https://www.investopedia.com/terms/b/bollingerbands.asp). Although these bands are some of the most useful [technical indicators](https://www.investopedia.com/terms/t/technicalindicator.asp) if applied properly, they are also among the least understood. One good way to get a handle on how the bands function is to [read the book](https://www.amazon.com/Bollinger-Bands-John-ebook/dp/B000FA5MG2/r=8-1) "Bollinger on Bollinger Bands," in which the man himself explains it all. According to Bollinger, there's one pattern that raises more questions than any other aspect of Bollinger Bands. He calls it "the Squeeze." As he puts it, his bands, "are driven by [volatility](https://www.investopedia.com/terms/v/volatility.asp), and the Squeeze is a pure reflection of that volatility." Here we look at the Squeeze and how it can help you identify breakouts. ### Key Takeaways - Bollinger bands show points of high and low volatility for a stock. - Bollinger bands are a series of lines plotted two standard deviations away from the simple moving average of an asset's price. - Bollinger bands are used in combination with other indicators to determine if a breakout is likely, and what direction it will take. - If the price is close to the upper bollinger band, that can indicate that the stock is overbought. If it is close to the lower band, it may be oversold. Get personalized, AI-powered answers built on 27+ years of trusted expertise. ## Understanding Bollinger Bands A Bollinger Band, as we mentioned above, is a tool used in technical analysis. It is defined by a series of lines that are plotted two [standard deviations](https://www.investopedia.com/terms/s/standarddeviation.asp)—both positively and negatively—away from the [simple moving average (SMA)](https://www.investopedia.com/terms/s/sma.asp) of the price of an asset. **Bollinger Bands identify a stock's high and low volatility points. While it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because [equities](https://www.investopedia.com/terms/e/equity.asp) alternate between periods of low volatility and high volatility—much like the calm before the storm and the inevitable activity afterward. Here is the Squeeze equation: > BBW > > \= > > TBP > > − > > BBP > > SMAC > > where: > > BBW > > \= > > B > > o > > l > > l > > i > > n > > g > > e > > r > > B > > a > > n > > d > > ® > > width > > TBP > > \= > > Top > > B > > o > > l > > l > > i > > n > > g > > e > > r > > B > > a > > n > > d > > ® > > ( > > the top 20 periods > > ) > > BBP > > \= > > Bottom > > B > > o > > l > > l > > i > > n > > g > > e > > r > > B > > a > > n > > d > > ® > > ( > > the bottom 20 periods > > ) > > SMAC = Simple moving average close > > (the middle 20 periods) > > \\begin{aligned} &\\text{BBW}=\\frac{\\text{TBP }-\\text{ BBP}}{\\text{SMAC}}\\\\ &\\textbf{where:}\\\\ &\\text{BBW} = Bollinger Band ^ {\\circledR} \\text{width}\\\\ &\\text{TBP} = \\text{Top }Bollinger Band ^ {\\circledR} \\left(\\text{the top 20 periods}\\right)\\\\ &\\text{BBP} = \\text{Bottom }Bollinger Band ^ {\\circledR} \\left(\\text{the bottom 20 periods}\\right)\\\\ &\\text{SMAC = Simple moving average close}\\\\ &\\text{(the middle 20 periods)}\\\\ \\end{aligned} > > BBW\=SMACTBP − BBPwhere:BBW\=BollingerBand®widthTBP\=Top BollingerBand®(the top 20 periods)BBP\=Bottom BollingerBand®(the bottom 20 periods)SMAC = Simple moving average close(the middle 20 periods) When Bollinger Bands are far apart, volatility is high. When they are close together, it is low. A Squeeze is triggered when volatility reaches a six-month low and is identified when Bollinger Bands reach a six-month minimum distance apart. ### Important A Bollinger Squeeze occurs when the top and bottom band reach their minimum distance apart. ## Determining Breakout Direction The next step—deciding which way stocks will go once they break out—is somewhat more challenging. To determine breakout direction, Bollinger suggests that it is necessary to look to other indicators. He suggests using the [relative strength index (RSI)](https://www.investopedia.com/terms/r/rsi.asp) along with one or two volume-based indicators such as the [intraday intensity index](https://www.investopedia.com/terms/i/intradayintensityindex.asp) (developed by David Bostian) or the accumulation/distribution index (developed by Larry William). If there is a positive [divergence](https://www.investopedia.com/terms/d/divergence.asp)—that is, if indicators are heading upward while price is heading down or neutral—it is a [bullish](https://www.investopedia.com/terms/b/bull.asp) sign. For further confirmation, look for volume to build on up days. On the other hand, if price is moving higher but the indicators are showing negative divergence, look for a downside breakout—especially if there have been increasing volume spikes on down days. Another indication of breakout direction is the way the bands move on expansion. When a powerful trend is born, the resulting explosive volatility increase is often so great that the lower band will turn downward in an upside break, or the upper band will turn higher in a downside breakout. See Figure 1 below, showing a Squeeze pattern setting up in the year leading up to a KB Home ([KBH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=kbh)) breakout. Bandwidth reaches a minimum distance apart in May, followed by an explosive breakout to the upside. Note the increasing relative strength index (shown in window 1), along with increasing intraday intensity (the histogram in window 2) and the accumulation/distribution index (the green line in window 2), both of which (demonstrated by line A) are showing positive divergence with price (demonstrated by line B). Note the volume build that occurred beginning in mid-April through July. Figure 1. Image by Sabrina Jiang © Investopedia 2021 ## The Head Fake A third condition to look out for is something Bollinger calls a "[head fake](https://www.investopedia.com/terms/h/headfake-trade.asp)." It is not unusual for an asset to turn in one direction immediately after the Squeeze, as if to trick traders into thinking the breakout will occur in that direction, only to reverse course and make the true and more significant move in the opposite direction. Traders who act quickly on the breakout get caught offside, which can prove extremely costly if they do not use [stop-losses](https://www.investopedia.com/terms/s/stop-lossorder.asp). Those expecting the head fake can quickly cover their original [position](https://www.investopedia.com/terms/p/position.asp) and enter a trade in the direction of the reversal. In Figure 2, Amazon appeared to be giving a Squeeze setup in early February. Bollinger Bands were at a minimum distance apart, which had not been seen for at least a year, and there is a six-month low bandwidth (see line A in window 2). There is negative divergence between the RSI (line 1 of window 1), the intraday intensity (line 2 of window 2), accumulation/distribution index (line 3 of window 2), and price (line 4 of window 3)—all of which point to a downward breakout. A Squeeze candidate is identified when the bandwidth is at a six-month low value. Breaking above the 50-day moving average (the orange line in the lower volume window) on drops in stock price, suggesting a build-up in selling pressure, volume shows above normal values on downside price moves. Finally, the long-term trendline is breached to the downside in the first week of February. A downside breakout would be confirmed by a penetration in the long-term support line (line 5 of window III) and a continued increase in volume on downside moves. Figure 2. Image by Sabrina Jiang © Investopedia 2021 The challenge lies in the fact that the stock had demonstrated a strong uptrend, and one pillar of [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) is that the dominant trend will continue until an equal or greater force operates in the opposite direction. This means the stock could very well make a head fake down through the [trendline](https://www.investopedia.com/terms/t/trendline.asp), then immediately reverse and break out to the upside. It could also fake out to the upside and break down. While it looks set to break out to the downside along with a trend reversal, one must await confirmation that a trend reversal has taken place and, in case there is a fake-out, be ready to change trade direction at a moment's notice. ## To Squeeze or Not To Squeeze? Just like any other strategy, the Bollinger Squeeze shouldn't be the be-all and end-all of your trading career. Remember, like everything else in the investment world, it does have its limitations. If you follow it too closely and don't consider the risks—and limit them—you could stand to lose. Do your research, take care of your capital, and know when you should make an exit point, if necessary. ## How Do You Read Bollinger Bands? Bollinger bands are used to visualize the high and low ranges of a stock's price given recent volatility. If the price of an asset is close to the upper band, that can be a signal that the asset is overbought. Similarly, if the price stays close to the lower band, that can be a sign that it is oversold. ## What Is the Best Time Period for Bollinger Bands? Traders typically calculate Bollinger bands for the last 20 periods, where a period can be a few minutes, an hour or a day. However it is possible to calculate Bollinger bands for a different number of periods. ## Are Bollinger Bands Reliable? While Bollinger bands can be used effectively as part of a technical analysis strategy, they can generate false signals. Experts recommend combining them with other indicators to forecast price movements. Even with the best strategy, it is not always possible to predict entry and exit points with 100% accuracy. ## The Bottom Line **The Squeeze relies on the premise that stocks constantly experience periods of high volatility followed by low volatility. Equities that are at six-month low levels of volatility, as demonstrated by the narrow distance between Bollinger Bands, generally demonstrate explosive breakouts. By using non-collinear indicators, an investor or trader can determine in which direction the stock is most likely to move in the ensuing breakout. With a little practice using your favorite charting program, you should find the Squeeze a welcome addition to your bag of trading tricks.
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