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Pullbacks scan

Lower Bollinger Band Screener

This scan finds stocks that closed below the lower Bollinger Band (20, 2) while the price is still above the 200-day moving average.

Run this scan in the live demoFree, no sign-up. The demo uses made-up sample data.

The exact rule

Type this in Chalni: close below lower bollinger band and close above 200 day sma

  1. Close < BB lower(20)
  2. Close > SMA(200)

Find US stocks where the closing price is below the lower Bollinger band (20, 2); and the closing price is above the 200-day simple moving average.

Formula view
close < bb_lower(20, 2)
AND close > sma(close, 200)
Example chart: Lower Bollinger band in an uptrendDaily candles of a made-up sample stock with Bollinger bands (20, 2); 200-day SMA. The shaded day is the day the scan fired.
  • Bollinger bands (20, 2)
  • 200-day SMA
  • Shaded day: the scan fired
Example from Chalni's made-up sample market, not a real stock. It shows the most recent time this scan fired in the sample US market, picked whether or not the trade worked.

What it means

A close below the lower band is an unusually large drop compared with the last 20 days. In a stock that is in a long-term uptrend, these stretched dips often snap back toward the middle band, the 20-day average.

This is a mean-reversion idea: buy when the price is far below its normal level and expect it to come back. It is the opposite mindset of the breakout scans.

How traders use it

  • Many traders wait for a close back inside the bands before buying.
  • A common first target is the middle band, the 20-day average.
  • Keep positions small: mean-reversion trades are often right, but can lose a lot when they are wrong.

Watch out for

  • Bad news can push a stock down and keep it down. Check why it fell.
  • If the 200-day average breaks, the uptrend reason for the trade is gone.

Test it before you trust it

Every scan in Chalni sits an exam. First it runs on older data, the practice: each time it picks a stock, the stock is held for 10 trading days and 0.2% is paid in costs. Then it runs on newer data it has never seen, the exam. A scan that only works in practice has just memorised the past.

See the practice and exam results for this scan in the demo (on sample data; real data comes at launch).

Questions

Is a close below the lower Bollinger Band a buy signal?

Not by itself. It shows the price is stretched. In an uptrend it often bounces, but in a downtrend the price can keep riding the lower band.

What is mean reversion?

The idea that prices that move far from their average tend to come back toward it.

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