David: <<VVUS pushing through the upper Bollinger Band (green line) means that we can expect reactions downward from profit-taking, which we saw Friday. From Magee and Edwards (1997)>>
Hitting the upper band may mean overbought, but I doubt one will say that is the case with VVUS these days. Like any indicator, B-Bands have to be considered along with everything else.
From Edwards & Magee, 7 ed, p. 346 "When price touches the upper B-Band, and RSI is below 70, it is an indication that the trend will continue". (RSI is now 41.)
This book does not seem to mention the importance of B-Bands widening and narrowing. The VVUS bands have been tightening for the past 7 bars. From equis.com
"Mr. Bollinger notes...Sharp price changes tend to occur after the bands tighten, as volatility lessens."
Tossing in the bullish MACD crossover at the first of the year (coincided nicely with the end of tax-loss selling), and what could be the reversal of the short-term downtrend that started with The Gap, I would not be surprised to see VVUS continue upward and widen the bands, perhaps after continued narrowing.
I am new to this also, so don't take any of it too seriously. VVUS price is really in the hands of the institutions.
Off-topic: I had just read up on this yesterday, since I was going to go hear John Bollinger speak this morning. Unfortunately, he mostly plugged his advisory service and didn't talk about TA at all. |
