Bollinger Bands Pullback

High Probability Trading with the Delphian Studies

Signals to Buying Stocks on a Pullback

Bollinger Bands, State ModelingTM and Simple Moving Average (SMA)

Explanation of the signals:

Bollinger Bands 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

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.

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.

 

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 typically with the most significant percentage moves over the longest period. Using the three signals as confirmation for a bullish stock can provide the opportunity to enter a trade at discount prices near a potential short-term bottom. The Bollinger Band Pullback study uses the Bollinger Bands set at 2.5 standard deviations for 20 days, the closing price above the 50 days SMA and State Modeling™ current state in State 1 as a bullish signal with expected continued price movement higher.

 

 

Charts depicting confirmation of a pullback:

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

 

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



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

 

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

 

 

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.

 

 

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