What are Bollinger Bands? They're channels plotted 2 standard deviations (SD) away from a simple moving average (MA). These are powerful technical analysis tools that allow support / resistance players (myself) to make short term "scalp" plays. Essentially, the price of the stock will stay within BB unless there's a "black swan" event or there is a large price spike from earnings. Therefore, anytime the price of a stock closes significantly outside of BB, there's a very good chance that it will quickly ascend / descend back within the bands.
The most widely recognized BB is the 20MA, denoted as 20, 2. Let's take a look at a chart of DE.
Notice how that last candle is completely outside of the bottom band. W%R is also now in oversold territory, and DE closed above its 50MA. In addition, the overall market may be due for a little snap back tomorrow, as I believe it was oversold on bad Walmart earnings and sluggish CPI, of all things.
Here's the trade: +3 DE JUN14 92.5 calls @ 1.02
No comments:
Post a Comment