Price with EMA lines
What it shows
A price chart with two exponential moving averages (EMA 9 and EMA 21) and Bollinger Bands (BB 20,2). It shows the short-term trend direction and volatility, that is, how far price deviates from its mean.
How to read it
First judge direction from the EMA setup, then use the bands to gauge volatility and extremes. The strongest picture appears when the EMA setup and the position versus the bands agree, confirmed by volume.
Parameters
- EMA 9 vs EMA 21
- The relative position of the fast (9) and slow (21) average shows the short-term direction.
- Positive reading: EMA 9 above EMA 21 and price above both: historically a short-term bullish setup.
- Negative reading: EMA 9 below EMA 21 and price beneath them: historically a bearish setup.
- Neutral reading: The averages intertwine and price drifts around them, which means a sideways trend.
- Bollinger Bands (BB)
- Band width shows volatility; touches of the edges mean price extremes.
- Positive reading: Price bounces off the lower band in a narrow channel, which historically means exhausted selling.
- Negative reading: Price hugs the upper band in euphoria, which historically is an overheated zone.
- Neutral reading: Price in the middle of the channel: balance, no extremes.
Example
Price drops to the lower BB band and EMA 9 starts curling back toward EMA 21, which is historically a picture of selling pressure exhausting. When price clings to the upper band in a widened channel, correction risk historically rose; a move in the middle of the channel is neutral consolidation.