RBOB Bollinger Band Squeeze
Updated
The RB1! Bollinger Bands bandwidth has narrowed to the narrowest width in 11 months as can be seen via the BandWidth indicator. Such a collapse in volatility usually precedes a volatility breakout in either direction. A Bollinger Band squeeze, which is a type of volatility breakout setup, is triggered when the bandwidth puts in a 6-month low which is a condition that has been achieved. This criterium is defined in the book “Bollinger on Bollinger Bands” by John Bollinger in the chapter "The Squeeze." The book states that a squeeze may oftentimes head fake and that a parabolic SAR (PSAR) may be used as a reversal trigger for an open trade or a trigger point for opening a new position in the direction price was heading when it hit the PSAR. Volume indicators and other technicals should be used to try and determine the direction of the squeeze and that is what I’ve done. Accumulation/Distribution% which is detailed in the book and linked below as an indicator I’ve published is trending down which is not necessarily the suggested use of the indicator but it was the best hint I could find about the direction of the breakout. %B is also trending down which again isn’t the intended use of the indicator but there’s not much else to go by. There’s a trendline which suggests going short and the 20-day sma is sloping downward which also suggests going short although it is pretty close to rolling up. Last time I noticed a squeeze setup was in soybeans and it broke out in the direction of the prior couple months which was down and is currently down with RBOB. The soybean idea is linked below.
I’ve come up with down as the anticipated direction of the squeeze breakout with a stop (and reverse if practical) at the PSAR (blue dots trailing stop) and a target of 1.9315 at the lower channel line which should fall above the previous low of 1.8799.
I will not actually be trading this because the notional value of 1 contract is $99,531 which is too high for me right now and it’s not a high conviction trade idea, more of a “I think this is what’s gonna happen, but it can go either way” type deal. It can head fake in one direction and break out in the other. If anyone has any ideas on which direction the volatility breakout is likely to be in based on technicals or fundamentals, please share.
Accumulation/Distribution% indicator:
Soybean Bollinger Band Squeeze idea:
I’ve come up with down as the anticipated direction of the squeeze breakout with a stop (and reverse if practical) at the PSAR (blue dots trailing stop) and a target of 1.9315 at the lower channel line which should fall above the previous low of 1.8799.
I will not actually be trading this because the notional value of 1 contract is $99,531 which is too high for me right now and it’s not a high conviction trade idea, more of a “I think this is what’s gonna happen, but it can go either way” type deal. It can head fake in one direction and break out in the other. If anyone has any ideas on which direction the volatility breakout is likely to be in based on technicals or fundamentals, please share.
Accumulation/Distribution% indicator:
Soybean Bollinger Band Squeeze idea:
Note
It has broken out to the upside along with everything but the dollar over the past two days. As of this writing it's at 2.65. I dug into the EIA data to try and figure out what it looks like from a price vs supply standpoint. By 2022 standards it's on the low end for ~25 days of supply but by 2015-2021 standards it's way overpriced. It appears it has consolidated in this range of uncertainty as to whether it should be priced for inflationary conditions or not. As of right now, the market is choosing inflation. I'm kind of leaning bull right now but if price turns the other way and takes out these two days then I would turn bear and maybe even try going short if I meet the margin requirements. 
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