John Bollinger, creator of the Bollinger Bands trading tool, has stated that most cryptocurrencies are at “Squeeze levels”, indicating that they are due a big move soon. Bollinger made the comment on Twitter but didn’t add any potential direction the moves could take, which is probably a wise move, simply adding that it was time to “pay attention” to cryptocurrencies.
Most crypto currencies are at or near Bollinger Band Squeeze levels. Time to pay attention.
— John Bollinger (@bbands) December 13, 2019
Bollinger is Not Wrong
As we can see from the below three examples, there are certainly a number of tokens currently experiencing a Bollinger Band squeeze. However, as anyone who understands the basics of Bollinger Bands knows, such a squeeze is not indicative of direction, merely of an imminent move, as evidenced by the past moves also highlighted after a squeeze was experienced.
So without Bollinger giving us handy hints, how do we know which coins to look out for? Bollinger himself recommends using his Bollinger Bands in association with two or three other indicators that provide other types of market signals, ideally ones that use different types of data. Good examples of these are moving average divergence/convergence (MACD) and relative strength index (RSI). Adding these indicators to the Bitcoin chart, we can see that the RSI is low which is suggestive of an upwards move but the MACD is on the verge of crossing bearish, which contradicts this suggestion.
When data is inconsistent like this, it is important to take a step back and look at the recent trend and the fundamentals of a security to try and determine the move direction. The fundamentals of Bitcoin are no different to what they have been for the past few months, except for the potential selling pressure caused by the PlusToken Ponzi scheme, which has dumped over ₿140,000 in the last three and a half months, leaving some ₿58,000 still to sell as quickly as they can.
Barring the spike to $9,000 in October, the trend has by and large been downwards since peaking at $13,870 in June, which was illustrated by the fact that Bitcoin fell back to an even lower level once the rush had died down.
BitStarz News Says…Down She Goes
The last Bollinger Band squeeze, which occurred in late September, led to a $2,300 price crash, and unless the general trend of the last five months can be reversed in the next move, it has to be assumed that another downard move is coming. This, combined with the selling pressure of the PlusToken BTC and the potential miner capitulation this would cause, leads us to think that another leg down is imminent.