A Brief Look at Bollinger Bands

The following chart shows a gold index called the Dow Jones United States Precious Metals index, (DJUSPM). The index has a different gold stocks composition than the HUI or XAU Indices, and, as such, can sometimes give you a different perspective.


The main point in the above chart is that this index continues to trade sideways, within a very narrow band. As this is occurring, the bollinger bands are beginning to tighten, and the width of these bands are shown in the indicator on the bottom panel.

In my opinion, explosive moves, either up or down, are preceded by times of extremely low volatility.