Playing With the Bollinger Band

Bollinger Band width measures the percent difference between upper and lower Bollinger Bands. It is used, among other things, to identify stocks that are being squeezed and have the potential to make volatile moves. Trading breakouts or breakdowns from tight consolidation patterns offers the advantages of clearly defined entry points, close stop-loss levels and target-price projections.

Storage and networking company Brocade Communications (BRCD) has been trading in a tight channel consolidation for about a month, and its Bollinger Band width is the second lowest for the year. Additionally, it has defined an uptrend line off the lows since August, and triple-top resistance in the $8.35 area. Moving average convergence/divergence is in bearish divergence to the stock price and the money flow index, a volume-weighted relative strength indication, is below its centerline....317 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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