Trade Stock Indices

Spot Trend Reversals with Bollinger Bands - Trade Double Tops and Bottoms on Indices

Before considering that a index reversal is occurring, a trader should wait for the price to shift in the other direction after hitting one of the Index Bollinger bands.

Even better one should see the price cross-over the moving average(MA).

Double Bottoms Trend Reversals

A double bottom signals a buy. It forms when price drops below the lower band, bounces back to make the first low, then forms another low above that band later.

The second lowest price should be as high as or higher than the first one, and it is important that the second lowest price does not touch or go past the lower boundary. This positive Index pattern becomes real when the price goes up and ends trading above the middle boundary (simple average).

Bollinger Bands Trend Reversals

Double bottoms with Bollinger Bands for trend reversal strategy.

Double Top Trend Reversals

A double top signals a sell. It happens when index price breaks the upper Bollinger band. Then it pulls back to a high. Later, another high forms under the band.

It's important that the second price high isn't higher than the first, and it shouldn't touch or break through the top band. The price movement confirms this bearish Index arrangement when it moves and closes below the middle band (simple moving average).

Bollinger Bands Index Trend Reversals

Double Tops - A Trend Reversal Strategy Employing Bollinger Bands in Conjunction with the Double Top Pattern

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