Bollinger Bands

Bollinger Bands wrap a volatility-based envelope around a moving average, and they're one of the indicators the Quant Engine computes — specifically a 20-period SMA with bands at 2 standard deviations, on daily closes.

The three lines

The middle band is a 20-day SMA. The upper and lower bands sit at plus and minus 2 standard deviations of price around that average. Because the bands are defined by standard deviation, they widen automatically when the stock gets more volatile and narrow when it calms down.

What band width tells you

Narrow bands mean unusually low recent volatility — often called a "squeeze" — which frequently precedes a bigger move, though it says nothing about which direction. Wide bands mean the stock has been swinging a lot recently.

The common misread

Price touching the upper or lower band is not automatically a sell or buy signal. Because the bands are built from standard deviation, roughly 5% of price observations are statistically expected to fall outside them even in a perfectly ordinary market — that's how the math works, not an anomaly.