Bollinger Bands Pullback

High Probability Trading with the Delphian Studies

A Pullback is a small to moderate drop in a stock price from recent peaks that occurs during an uptrend.  Delphian finds stocks in pullbacks in our most bullish state (State 1) that have moved below the lower Bollinger band while staying above their 50 day moving average. Backtesting revealed this signal occurs near the end of the pullback and to expect the stock to resume the trend higher in the near future.


Trade Theory:

When prices near or cross below the lower Bollinger band, traders typically view this as an oversold condition.  When a stock price holds above the 50-day simple moving average (SMA), traders believe the SMA is acting as support and are bullish on the stock.  State 1 in State Modeling™ is the most bullish state with the most significant percentage moves higher over the longest period.  Using the three signals as confirmation for a trade entry can provide the opportunity to enter a trade near a potential short-term bottom.


The Bollinger Band Pullback study uses the following signals:

  • Close price crossed below the lower Bollinger Band.  Bollinger Bands set at 2.5 standard deviations for 20 days
  • Closing price of the stock is above the 50 day SMA
  • State Modeling™ set for Current State is State 1 



Charts depicting confirmation of a pullback:

DPZ State Modeling – Current State is State 1 on 2/8/2018

bb sm


DPZ closing price crossed below Bollinger Bands 2.5 SD for 20 days on 2/8/2018

bb bb


DPZ closing price is above the 50 days SMA on 2/8/2018

bb sma


DPZ chart after the bullish signal on 2/8/2018

bb result



Trade results after buy signal:

Long stock with 5% profit and 10% stop loss

Entry 02/08/2018, 6.7% profit achieved on 02/12/2018 (In trade 3 trading days)

Long call with 25% profit and 100% stop loss

Entry 02/08/2018, 36.53% profit achieved on 02/09/2018 (In trade 2 trading days)

For additional option strategy results, please fill form on the right side of the page. One of Trading Strategists will reach out to you.



Explanation of the signals:

1.  Bollinger Bands (BB) are volatility bands placed above and below a moving average. Volatility is based on the standard deviation, which changes as volatility increases and decreases. The bands automatically widen when volatility increase and narrow when volatility decreases

2.  Standard Deviation (SD) is calculated through the average volatility of the stock on a daily basis over a historical period.  It indicates how much the value deviates from the mean.  In periods of low volatility the width of the price ranges will be less than in a high volatility environment.

3.  Simple Moving Average (SMA) is calculated by adding the closing price of the security for a specific number of days and then dividing this total price by days.

4.  State Modeling™ is a proprietary signal from Delphian Trading. Stocks are in a State numbered from 1 to 8 at any given time and only in one state at a time. States 1, 3, 5 and 7 are bullish and States 2, 4, 6 and 8 are bearish. State 1 is extremely bullish while State 8 is extremely bearish. This signal allows users to find symbols based on their current state and whether or not their current targets or stops losses have been met.

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