By Ryan Gorman, CFA, CMT, BFA
Finding the Squeeze
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Finding the Squeeze
It has been a joy looking at the market with you this week. An interesting one for sure. For Friday finally, I wanted to teach you a way to find a chart pattern I have liked to trade. Though John Bollinger has done a lot of work on this, I learned about this in Mastering the Trade by John Carter.
It’s called a squeeze, and it is when the Bollinger band, a measure of standard deviation is within the Keltner channels, a measure of average true range. Both measure volatility with the idea being that period of low volatility lead to periods of high volatility and sometimes large moves.
If you are a stock charts user, I can give you the scan I use here:
[type is stock]
and [country is US]
and [Upper BB(20,2) <= Upper Kelt Chan(20,1.5,10)]
and [Lower BB(20,2) >= Lower Kelt Chan(20,1.5,10)]
and [Close > .2]
and [Volume > 1,000,000]
From there, I flip through the list to find good setups. One that stood out toward the top of the list was SMCI, a recent darling.
Courtesy of StockCharts.com
How you trade this depends on how aggressive you are. Waiting for a breakout either way is one of the more conservative methods. If you have an edge, you can accumulate within the range but there are no rules I have noticed on how long it takes to break out. Here, the RSI has been improving. One may look for a breakout to the upside.
I hope you have found these charts helpful and find your own way with the squeeze setup.
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Originally posted 12th July 2024
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Very helpful. Noted you used stockcharts.com. I am on Interactive Brokers platform. Would like IB to provide us similar features. TY.
Hello, thank you for reaching out. Please send specific suggestions about TWS to twsfeedback@interactivebrokers.com. There is also a New Feature Poll in Client Portal https://portal.interactivebrokers.com/portal/#/suggestions where IBKR users can vote and comment on each other’s suggestions. We appreciate your feedback!