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Technology Stocks : TAVA Technologies (TAVA-NASDAQ)
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To: C.K. Houston who wrote (14442)4/8/1998 5:28:00 PM
From: Loren   of 31646
 
Another way of looking at this...

The width of Bollinger Bands are dependent on the volatility of the stock at the time (specifically, the standard deviation of the stock price over the last 'n' periods).

When the width 'constricts', it is because the volatility has decreased. Often, the volatility decreases when either: the stock has gone into a lull (the bulls and the bears are waiting each other out), OR when the bulls and the bears are evenly matched and temporarily unable to beat each other out.

Finally, either the bulls, or the bears, regain control and voila! you have stock movement again, often significant. And the Bollinger Bands expand again, because of the increased volatility associated with the sudden stock movement.

Anyway, I believe this is why many technicians look for the 'constriction' to precede a breakout, whether it is on a intraday chart or a longer term (day/week) chart.

Loren

P.S. Hey Count... go Gators...!
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