Bollinger band is formed by 20-day SMA(or EMA) line & two lines above & below taking 2-standard deviation of SMA (or EMA) line.
Most of the times stock price remains within the bollinger band. When stock is in strong bullish trend or bearish trend stock price may sustain above or below the band for a definite time period.Most of the times stock price remains inside the band.
When stock becomes saturated in a particular direction (uptrend or downtrend) price touches the upper or lower bollinger band line,indicating trend change may happen.
If at this stage a distinct candle (trend-changer candle) appears, it may signal trend reversal in advance.
Candles showing indecision in trader or driven one sided either by buyers or sellers may predict trend change before it actually happens.
If trend-changer candle is totally out of band the chances of trend change is more. Even if candle touches or intersect the upper or lower band, trend change may occur.
Spining top coupled with bollinger band -
If you observe the above chart of Sunpharma mar-2019 spining top appearing at the vertical line. More than half of a candle body is out of upper band line & see the next candle it is green, showing trend change at least for one candle.
Starting from left of the chart spining top & shooting star appeared within the band but no trend change occurs.
The stock shows saturation level at the vertical line & trend change is predicted by spining top showing indecision in traders. The result is next candle is red.
If you look to the right of vertical line a small green marubozu touching the upper bollinger band line is still making a trend reversal for a single candle.
Observe above chart of jk tyre feb-2018 showing spining top at the end of downtrend. The spining top appearing at the vertical line is partially below the band. It shows the small downtrend coming to an end & at least next candle is going to be green.
Looking at the left side of the chart stock is showing sideways movement. It can be understood by small candles & small tails.
Once again, if you see to the right of vertical line green marubozu intersecting the upper bollinger band & changing the trend.
After that downtrend prevailed touching the candles to lower bollinger band but no trend change occured due to absence of trend-changer candle hence continues the trend.
Inverted hammer coupled with bollinger band -
Inverted hammer indicates buying pressure created by buyers to stop the downtrend. If it occurs at the saturated level the ongoing trend comes to an end.
This can be well observed by the chart above of Sunpharma jan-2019.If you see previous candle to vertical line it's long red candle with tail. It does mean sellers dragged the stock price too much but buyers entered & made the candle little bit small. The red candle crossed the lower band line & the next candle is green showing inverted hammer. This inverted hammer appeared totally below the lower band line & predicted the firm trend change. See the next candle. It is gap-up opening & green marubozu.
The middle line(20-day SMA line) may be taken into account to trade. Look the third candle to the right of vertical line. It is spining top touching the middle line & again trend reversal.
Shooting star coupled with bollinger band-
Shooting star denotes the sellers are creating resistance to price & want to reverse the trend. If such a situation takes place at the upper band trend change may be seen.
The above figure of Grasim industries ltd. June-2017 shows shooting star at the vertical line.
The steady uptrend is seen first of all in the chart. Some candles are out of band but unable to bring trend change. But at the vertical line a prominent shooting star appeared which is totally out of upper bollinger band line.If trend-changer candle appears totally out of bollinger band it's a firm sign that trend change may take place.
See the next candle,it is red.
Dragonfly doji coupled with bollinger band -
The above chart of Infosys ltd. Nov-2018 shows dragonfly doji at the vertical line.
Dragonfly doji shows no or little body & longer tail. It shows the fight between sellers & buyers ending in a tie. The body at the upper end indicates uptrend, though it may appear at the upper end.
To the left of above chart we see a downtrend prevailing over a period & all the bodies being red. At the vertical line dragonfly doji appeared having body inside but a tail out of lower band line.It created a trend change,next candle being green.
Candlestick is the face of market. Just by face expression we understand what a front person want to say. Just by observing candlestick we can understand where the market is going to be headed. For this we should observe number of candlestick charts.
So, how to trade? Let's discuss that at the end of next article.
Most of the times stock price remains within the bollinger band. When stock is in strong bullish trend or bearish trend stock price may sustain above or below the band for a definite time period.Most of the times stock price remains inside the band.
When stock becomes saturated in a particular direction (uptrend or downtrend) price touches the upper or lower bollinger band line,indicating trend change may happen.
If at this stage a distinct candle (trend-changer candle) appears, it may signal trend reversal in advance.
Candles showing indecision in trader or driven one sided either by buyers or sellers may predict trend change before it actually happens.
If trend-changer candle is totally out of band the chances of trend change is more. Even if candle touches or intersect the upper or lower band, trend change may occur.
Spining top coupled with bollinger band -
If you observe the above chart of Sunpharma mar-2019 spining top appearing at the vertical line. More than half of a candle body is out of upper band line & see the next candle it is green, showing trend change at least for one candle.
Starting from left of the chart spining top & shooting star appeared within the band but no trend change occurs.
The stock shows saturation level at the vertical line & trend change is predicted by spining top showing indecision in traders. The result is next candle is red.
If you look to the right of vertical line a small green marubozu touching the upper bollinger band line is still making a trend reversal for a single candle.
Looking at the left side of the chart stock is showing sideways movement. It can be understood by small candles & small tails.
Once again, if you see to the right of vertical line green marubozu intersecting the upper bollinger band & changing the trend.
After that downtrend prevailed touching the candles to lower bollinger band but no trend change occured due to absence of trend-changer candle hence continues the trend.
Inverted hammer coupled with bollinger band -
Inverted hammer indicates buying pressure created by buyers to stop the downtrend. If it occurs at the saturated level the ongoing trend comes to an end.
This can be well observed by the chart above of Sunpharma jan-2019.If you see previous candle to vertical line it's long red candle with tail. It does mean sellers dragged the stock price too much but buyers entered & made the candle little bit small. The red candle crossed the lower band line & the next candle is green showing inverted hammer. This inverted hammer appeared totally below the lower band line & predicted the firm trend change. See the next candle. It is gap-up opening & green marubozu.
The middle line(20-day SMA line) may be taken into account to trade. Look the third candle to the right of vertical line. It is spining top touching the middle line & again trend reversal.
Shooting star coupled with bollinger band-
Shooting star denotes the sellers are creating resistance to price & want to reverse the trend. If such a situation takes place at the upper band trend change may be seen.
The above figure of Grasim industries ltd. June-2017 shows shooting star at the vertical line.
The steady uptrend is seen first of all in the chart. Some candles are out of band but unable to bring trend change. But at the vertical line a prominent shooting star appeared which is totally out of upper bollinger band line.If trend-changer candle appears totally out of bollinger band it's a firm sign that trend change may take place.
See the next candle,it is red.
Dragonfly doji coupled with bollinger band -
Dragonfly doji shows no or little body & longer tail. It shows the fight between sellers & buyers ending in a tie. The body at the upper end indicates uptrend, though it may appear at the upper end.
To the left of above chart we see a downtrend prevailing over a period & all the bodies being red. At the vertical line dragonfly doji appeared having body inside but a tail out of lower band line.It created a trend change,next candle being green.
Candlestick is the face of market. Just by face expression we understand what a front person want to say. Just by observing candlestick we can understand where the market is going to be headed. For this we should observe number of candlestick charts.
So, how to trade? Let's discuss that at the end of next article.
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