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Technical Stock-Picking: How to Bet on Bollinger Bands

02/01/08 - 04:30 PM EST

Stockpickr Staff

Click here for larger image.

The Bollinger Bands give you an idea of the stock's price support and resistance levels, as well as how wide a price range the stock is expected to trade in. If the difference between the upper and lower band is expanding, the stock is breaking out of its trading range trading-range (either high or low). You can see this type of upward trend in Altria's October-to-December ("OND") quarter quarter in 2007 (see where the hand icon is pointing in the screenshot).

Notice that the Bollinger Bands expanded during the July-to-September ("JAS") quarter of 2007. This indicates that the stock was consistently trading at a higher price. You might want to ride a trend like this all the way up until the bands start to narrow. The narrowing of the bands indicates slowing price growth. If the bands are narrowing and the price is decreasing, it may be time to sell because the upward trend has played out.

3 Stocks I Saw On TV (Jan. 31, featuring Altria)
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