Bollinger Bands narrow as volatility falls and widen as volatility rises. The theory is that a volatility contraction is often followed by a volatility expansion. The directional clue depends on the break. Garmin (GRMN) has a classic contraction breakout working with a surge above the upper band on Friday. Notice that Bandwidth moved to its lowest level in over 8 months prior to this breakout.
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About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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