Bollinger Band Squeeze

What It Detects

Stocks with:

• Bollinger Bands contracting (low volatility)
• ATR% below average (confirmation)
• Coiling up for potential breakout or breakdown
• "Squeeze" setup before explosive move

The Formula

Copyatrp(14) < 2 and (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100 < 10

How It Works

1. atrp(14) < 2 - Average True Range as percentage < 2% (low volatility)
2. (bb_upper - bb_lower) / sma * 100 < 10 - Band width < 10% of price (tight squeeze)

This finds stocks where volatility has contracted significantly.

When to Use

Best for:

• Anticipating big moves (direction unknown)
• Swing trading with defined risk
• Stocks that have been range-bound
• Building a watchlist to monitor

Avoid when:

• You need immediate action (squeeze can last weeks)
• Stock in strong directional trend (no squeeze)
• Low liquidity stocks (may not break out cleanly)

Parameters You Can Tweak

Very Tight Squeeze

Copyatrp(14) < 1.5 and (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100 < 8

• Even tighter criteria (ATR < 1.5%, width < 8%)
• Fewer results but higher quality

With Trend Filter

Copyatrp(14) < 2 and (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100 < 10 and c > sma(200)

• Only find squeezes in uptrend stocks
• More likely to break higher

With Volume Confirmation

Copyatrp(14) < 2 and (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100 < 10 and v < sma(v, 20)

• Volume drying up (accumulation)
• Often precedes breakout

Example Columns to Add

CopyPrice: c
ATR%: atrp(14)
BB Upper: bb_upper(20, 2)
BB Lower: bb_lower(20, 2)
BB Width: (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100
20MA: sma(20)
Volume: v / sma(v, 20)

Trading the Squeeze

Wait for Breakout

DON'T enter during squeeze. DO wait for expansion:

1. Scan finds squeeze
2. Add to watchlist
3. Wait for ATR to spike (> 3%)
4. Enter on direction confirmation
5. Set stop on opposite side of range

Directional Bias

Look at these clues:

• Price location: Near upper band = bullish, near lower = bearish
• 200-day MA: Above = bullish bias, below = bearish
• Volume: Expanding on up days = bullish
• RSI: > 50 = bullish momentum

Entry Strategies

Conservative (Confirmed Breakout):

1. Squeeze detected on scan
2. Price breaks above/below Bollinger Bands
3. Volume 1.5x average on breakout
4. Enter on first pullback to bands
5. Stop below/above bands

Aggressive (Early Entry):

1. Squeeze detected
2. Price touching upper band (bullish) or lower band (bearish)
3. RSI showing momentum in that direction
4. Enter small position
5. Add on confirmed breakout

What to Watch For

Strong signals:

• Squeeze lasting 2-3+ weeks (longer = bigger move)
• Price holding above key support
• Multiple tests of support/resistance (consolidation)
• Decreasing volume (coiling energy)

Warning signs:

• Squeeze forming at major resistance (likely fails)
• Very low liquidity (hard to exit)
• Earnings coming soon (unpredictable catalyst)
• Wider market in turmoil (may not follow technicals)

The Breakout

When squeeze releases:

• ATR spikes 2-3x normal
• Volume surges 2-5x average
• Price moves 5-15% quickly
• Direction can be either way

Measuring Target:

• Take band width at squeeze
• Project that distance from breakout point
• Example: $50 stock, $2 band width → Target $52 or $48

Common Mistakes

1. Entering during squeeze - No edge, just waiting
2. Assuming direction - Squeeze can break either way
3. No stop loss - Can break against you fast
4. Chasing breakout - Wait for pullback or skip it
5. Overtrading - Quality squeezes are rare (5-10 per week)

Combining with Other Indicators

Squeeze + RSI

Copyatrp(14) < 2 and (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100 < 10 and rsi(14) > 50

RSI > 50 suggests bullish breakout more likely

Squeeze + MACD

Copyatrp(14) < 2 and (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100 < 10 and macd_hist() > 0

Positive histogram shows underlying bullish momentum

Squeeze + Price Location

Copyatrp(14) < 2 and (bb_upper(20, 2) - bb_lower(20, 2)) / sma(20) * 100 < 10 and c > sma(20)

Price above middle band = bullish setup

Monitoring Squeezes

Build a Squeeze Watchlist

1. Run scan daily
2. Add new squeezes to watchlist
3. Set price alerts at band edges
4. Check watchlist 2x per day
5. Act when breakout occurs

Alert Levels

For a stock in squeeze at $50 with bands at $48/$52:

• Upper break alert: $52.50 (bullish breakout)
• Lower break alert: $47.50 (bearish breakdown)
• ATR alert: When ATR% > 3 (expansion starting)

Related Strategies

• Volume Spike - Confirms breakout direction
• Momentum Breakout - Enter after squeeze breaks
• Trend Strength - Filter for uptrend squeezes

Pro Tips

• Best squeezes: 20-30 trading days of low volatility
• Historical context: Check if stock has broken out before (pattern repeater)
• Sector watch: Multiple stocks in sector squeezing? Sector move coming
• False breakouts: First break often fails, second attempt often works
• Position sizing: Start small (half position), add on confirmation
• Time of day: Breakouts in first 30 minutes often fake; wait for mid-day confirmation
• Patience: Most important! Average squeeze lasts 3-4 weeks

Advanced: TTM Squeeze Indicator

The TTM Squeeze (John Carter) uses:

• Bollinger Bands (20, 2)
• Keltner Channels (20, 1.5 ATR)
• Squeeze = BBs inside Keltner Channels

Our simplified version focuses on ATR% and band width, which captures the same concept.