Often there is a build up of stop orders outside of the current trading range to protect against a breakout of the current trading range. If this period of lower volatility lasts for a long time, the resulting breakout can be fairly strong as resolution creates an imbalance in supply and demand as well as the build up of orders outside the previous trading range. Using our critical day with Bollinger bands can be valuable when added to your own trading platforms. Critical Days on the graph below are shown with Blue and Red dots. The blue dots , above or below the price plot, indicate successful critical days.
Red dots indicate failures.
A successful critical day indicates that the short trend did reverse, as expected by members, going into that period. Bollinger bands are shown on the graph with interpretation following the graph. Notice the Graph is the Russell 2000 index. Critical days have a wide application for the markets by nature and can be helpful in developing trading strategies and timing for stocks, options and futures. All formations, patterns, indicators and technical tools fail at various times and so should only be used to build a body of evidence in forming a trading decision rather than being solely relied upon.