V.15:12: Letters V15:12: Letters to S&C

V.15:12: Letters V15:12: Letters to S&C
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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

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