bhp opinion, page-48

Eurotravelover,

The Bollinger bands have their use, but many posters on these forums apply to them incorrect attributes.

Perhaps the most common misconception is that the position of the bands is an indication of where price will rise or fall to.

As you correctly observe, bands are dynamic and may move radically with price change --- that is why Bollinger bands are simply a visual statement of volativity.

Having said that, though, in the case of BHP at least, track through the chart and you will notice that piercing the band will very often indicate a sharp change of direction.

I and other posters here have used piercings to good effect in our trades.

The method, like most, is not infallible, and sometimes the retrace may only last a day or so...

But more likely than not it may indicate a more substantial decline from the top band....or rally from the bottom one.