By Volmike


Mike Bollinger Bands: The Volatility of Change

After understanding Volatility Mike as a normalized measure of daily percentage change, the next crucial step in our analytical framework is to apply Bollinger Bands directly to the Mike series. These are our Mike Bollinger Bands (Mike BB), and they are fundamentally different from traditional Price Bollinger Bands.

Mike BB vs. Price BB: A Crucial Distinction

To truly grasp the power of Mike BB, it's essential to understand how it differs from what most traders are familiar with:

  • Traditional Price Bollinger Bands:

    • Applied to: Raw Price (e.g., Close price).
    • Measures: The volatility of the price itself.
    • Interpretation: A widening of Price BB indicates increasing price fluctuation, while a narrowing (or "squeeze") suggests decreasing price volatility. Price touching the bands can indicate overbought/oversold conditions relative to recent price swings.

  • Mike Bollinger Bands (Mike BB):

    • Applied to: The Mike indicator series.
    • Measures: The volatility of the daily percentage change (momentum).
    • Interpretation: A widening of Mike BB indicates an increase in the magnitude of daily percentage moves, suggesting explosive momentum. A narrowing of Mike BB signals a compression in the rate of change, often a precursor to a significant surge in velocity. Mike touching its bands indicates exceptionally large daily percentage moves, signaling extreme positive or negative momentum.

This distinction is critical. While Price BB tells you how volatile the price is, Mike BB tells you how volatile the momentum is.

Key Importance of Mike Bollinger Bands

Mike BB is not just another indicator; it's a vital component of the VOLMIKE.COM system, offering unique insights:

1. Identifying Imminent Explosive Moves (The Squeeze)

One of the most powerful signals from Mike BB is a "squeeze" – when the bands contract tightly around the Mike line. This compression signifies a period where the daily percentage change is unusually calm or consolidating. This "tightness" often precedes a violent expansion in volatility and a significant directional price move. We watch for the "squeeze and pop" in Mike BB, as it's a high-probability setup for rapid price acceleration.

2. Confirming Extreme Velocity & Conviction

When the Mike line touches or exceeds its upper or lower Mike BB, it signals an extreme daily percentage move.

  • A touch of the upper Mike BB on a bullish move indicates exceptionally strong positive momentum.
  • A touch of the lower Mike BB on a bearish move indicates exceptionally strong negative momentum. These extreme moves, especially when combined with other signals like our "Horse" (high Relative Volume), confirm the conviction behind the price action and are integral to identifying our "Marengo" setups.

3. Early Warning for Trend Continuation or Reversal

The consistent behavior of Mike within or breaking out of its Bollinger Bands provides early clues. For example, if Mike consistently rides the upper band, it suggests strong, sustained positive momentum. Conversely, if it rejects the bands after an attempt, it can signal a loss of conviction or potential reversal.

4. Foundation for "Marengo" Setup Confirmation

Mike BB plays a direct role in confirming our "Marengo" classifications. For instance, a "BBW Expansion" (one of the "Bees" you'll learn about) is specifically tied to the widening of Mike Bollinger Bands after a period of contraction, indicating the "Volatiliy Perfection" required for certain high-conviction trades.

In essence, Mike Bollinger Bands allow us to see the "spring being coiled" or "released" within the market's momentum, providing a unique advantage in anticipating and capitalizing on high-velocity price movements. They transform abstract price action into actionable insights, making them indispensable for our short-term options trading strategies.