Bollinger Squeeze: Trading the Explosion After the Silence

The setup

Bollinger Bands (a 20-day average ± two standard deviations) breathe with volatility. When the bands contract to their tightest in roughly six months, the stock is coiled — and our signal fires when price then closes *above* the upper band, resolving the coil upward.

Why it works

Volatility mean-reverts: quiet periods are followed by loud ones with remarkable reliability. During a long squeeze, positions build on both sides — breakout buyers waiting above, breakdown sellers below, options cheapening. Whichever way it resolves, the losing side's forced unwinding *feeds* the move. We simply require the upward resolution before acting.

Our scanner's rules

• Band width in the bottom 15% of its 6-month range immediately before the break.
• Entry: the close above the upper band. Stop: the middle band (the 20-day average) — if price falls back through the middle, the expansion thesis is dead. Target: 2× the risk.
• Breakout volume above 1.3× adds confidence.

Common mistakes

• Anticipating the direction during the squeeze — the coil itself is directionless; wait for the break.
• Treating an upper-band *touch* as the signal: strong stocks ride the band for weeks. It's squeeze then break, not band-touching.
• Quitting after one head-fake: squeezes occasionally double-fake. The middle-band stop keeps each attempt cheap.

Full Bollinger background: our Bands guide. Live squeezes: Strategies page.