How could BOLL help you understand stock price trend?
- Case study of Twitter Stock
What is Bollinger Band Width?
The Bollinger Band Width is named after John Bollinger, Bollinger Band Width is the difference between the upper and the lower Bollinger bands divided by the middle band.
Below chart extracted from moomoo app demonstrates BOLL line, yellow color represents upper band line, blue color represents lower band line, purple color represents mid band line.
How BOLL indicator works?
Band Width = (Upper Bollinger Band - Lower Bollinger Band) / Middle Bollinger Band
Bear in mind that there is a tendency for bands to alternate between expansion and contraction.
- During a period of rising price volatility, the distance between the two bands will widen, Bollinger Band Width will increase.
- During a period of down price market volatility, the distance between the two bands will be narrow and Bollinger Band Width will decrease.
- When the bands are relatively far apart, that is often a sign that the current trend may be ending.
- When the distance between the two bands is relatively narrow that is often a sign that a security may be about to initiate a pronounced move in either direction.
How to apply BOLL to Twitter stock trend analysis?
Based upon the above Twitter stock BOLL chart, it is noticable that BOLL band width increased dramtically since April 4th after the news announcement that Elon Musk bought 9% of Twitter stock, twitter stock soared from $39 to $49 immediately after stock market opened on Monday, BOLL chart movement proved the fact.
Since the bands are ralatively far apart, it is a sign that current trend may be ending, Twitter stock price during past a few days proved, stock price seems hit the celling of $50 around , and then up and down around $50th.
Conclusion, $50 around could be the ceiling of Twitter stock price.