Bollinger Squeeze PresentBollinger Band Squeeze
The Bollinger Bands, part of John Bollinger’s suite of indicators, are some of the most popular indicators of the last 15 years. However, a staggering amount of people have not read his work detailing the workings of his indicators and their application. All of which can be found in Bollinger on Bollinger Bands. Bitcoin is like any other instrument – it follows periods of peace and calm and then big moves with high amounts of volume in a sustained trend. Bollinger Bands help to determine when we should expect to see a big spike in price action. Bollinger Bands are an example of a volatility indicator – and the Bollinger Bands themselves can be represented in a couple of ways, the first is the overlay on the candlestick chart itself, the second is with an indicator called the %B. I prefer the %B over the overlay, but it’s a matter of preference.
Because Bollinger Bands measure volatility, we need to understand the basics of how to interpret these indicators. When we see the upper and lower bands constrict and get very close together, it creates a condition known as the Squeeze or BB Squeeze. The Squeeze creates a sort of chicken or egg argument, but all we need to know is that the Squeeze precedes big moves. This is true for Bitcoin and any other instrument in any market. The size and power of the move may vary, but significant moves occur after a Squeeze. We don’t know how long a squeeze will last, but all we need to know is one thing:
Something big is about to happen.
The move out of a Squeeze can go either direction, generally in the direction of the overall trend. To get an idea of how far Bitcoin could move, we need to measure prior breakouts from a Squeeze. Some of the most recent and important ones are below. The levels are recorded from the position of the median line of the Bollinger Band (20) to the peak or trough of the breakout.
(2019) October 22nd – October 23rd: -11.43%
(2019) September 22nd – September 26th: -25.13%
(2019) April 28th – May 16th: +60.86%
(2019) March 15th – April 3rd: +38.69%
(2018) November 11th – December 15th: -50.80%
(2017) April 17th – May 25th: +126.99%
(2016) July 25th – August 2nd: -26.92%
(2016) May 25th – June 18th: +73.54%
There are other minor and some major breakouts from a Squeeze in the Bollinger Bands system, but the ones listed above give a good idea of not an average amount, but an example of the broad ranges that price can move out of a squeeze. But if we were to identify any particular average move, then a range between 20% to 30% would be likely (this is the cryptocurrency market after all). From the present value area, a 30% move above the midpoint would put Bitcoin at $9559, while a 30% drop would put Bitcoin at $5131. Any break down lower or higher should be closely observed for a false break. It is extremely common for price to have an initial break-in one direction only to have it abruptly reverse. We are more than likely witnessing the last important price level until the start of 2020.