Predict Stock Price Movement with this One Easy Trick — Over 95% Accuracy

Of course no one knows what the future holds, but a combination of trend analysis and other indicating factors can provide statistically sound predictions in the stock market.

Bollinger Bands are represented in this graph by the two green lines, known as the upper and lower bands.

Bollinger Bands are trend indicators that measure a moving average of the stock price and two standard deviations above and below the moving average. If you ever took a statistics class, you might remember that standard deviations measure the variation of a data set. In this case, the data set is the stock price over a set amount of time.

Graph of normal standard deviation — Source: Wikimedia

Using this concept, we can assume that 95.4% of all data points will fall within two standard deviations, represented by the upper and lower Bollinger Bands.

When a stock price continually touches the upper band, it is usually a signal that the stock is overbought and is likely to drop. Whereas when the price hits the lower band, it is thought to be oversold and is likely to go up.

See how the trend changes when it approaches or crosses the Bollinger Bands.

The image above shows how the stock price moves within the Bollinger Bands and how it typically changes direction when it approaches or crosses the upper and lower limits. Statistically, 95.4% of the time a stock hits the lower band it will come back up.

Keep in mind that this is purely a technical indicator and does not take into account market news, changes in the company, and other external factors on stock price.