LETTER FROM JOHN BOLLINGER Editor, The conventional interpretation of Bollinger bands is not overbought at the upper band and oversold at the lower band, as the Tezels assert in “On using volatility bands” (STOCKS & COMMODITIES, October 1997). Bollinger bands provide a relative definition of high and low that can be used in the interpretation of indicators to arrive at trading decisions. If a tag of the upper band is accompanied by confirmation from an appropriately specified indicator, higher — not lower — prices are called for. If that same tag were unconfirmed then lower prices would be expected. The Tezels’ assertion is insupportable; tags of the bands without reference to indicators are meaningless. Further, the Tezels’MAAVPB is nothing more than an 11-day, 1.7 standard deviation Bollinger band. One last note: As the Tezels correctly observe, closes outside of the bands are continuation signals. This was covered in the earliest Bollinger band literature. JOHN BOLLINGER, CFA, CMT Thank you for writing. We’d love to hear more in the form of an article! —Editor |
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