One of my favorite scans for a trade in the stock market is looking for setups with a tight Bollinger band squeeze with divergence (just ask our member Donald) but this end of month was different. I was looking for confirmation of something more....ominous.
In case you missed it, the S&P500 exhibited a rare (and solid) piercing of the upper monthly Bollinger band in May which was met with immediate selling pressure. To many technicians, merely piercing the upper band raises a warning flag as quite often it indicates the market will revert to the mean, or at a minimum the nearest support.
The Bollinger band mantra goes something like this:
- Buy when the price falls below the lower Bollinger band
- Sell when the price pierces outside the upper Bollinger band
and boy......did they sell!
I call it "rare" because normally price is contained within the Bollinger band and actually piercing the upper band with such severity only occurs every 5-10 years or more. Of course a nays
