School Corner
Pattern confirmation The best way to use Bollinger Bands is when the signal is confirmed by another signal, for example from a completed chart pattern. The following weekly chart of Astrazeneca shows a completed inverse head and shoulders pattern:
CHART - Astrazeneca
At the end of January 2013 the stock pushed through the neckline (blue trendline) of an inverse head and shoulders pattern [S,H,S]. This pattern is bullish and is confirmed when the neckline is broken. If we project the depth of the pattern from the breakout point, then the target in the medium/long term is above 3600. This bullish signal is confirmed by the Bollinger Bands signal given a week earlier. The week before, the price closed above the upper band following a period of consolidation in which the bands narrowed. The latest pull back to 2900 was caused by the shares going ex-dividend and so we, per the use of Bollinger Bands, expect the advance to resume.
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90 | www.financial-spread-betting.com | March 2013