John Bollinger is president and founder of Bollinger Capital Management, an investment management company that provides technically driven money management services to individuals, corporations, trusts and retirement plans. Mr. Bollinger publishes Capital Growth Letter and provides weekly commentary and analysis on CNBC, and was for years the chief market analyst on Financial News Network. In this issue we are using one of my favorite tools, the Bollinger Band Width Indicator, which was introduced by John Bollinger to the field of Technical Analysis. In his book Bollinger on Bollinger Bands, Mr. Bollinger explains the Bollinger Band Width and the Volatility Breakout System with these words: "Perhaps the most elegant direct application of Bollinger Bands is a volatility-breakout system. Our version of the venerable volatility-breakout system utilizes Band Width to set the precondition and then takes a position when a breakout occurs. The major problem with successfully implementing the Volatility Breakout system is a head fake. Coming out of a squeeze, stocks often do the same; they will first feint in the wrong direction and then make the real move."

The chart above is the Gold prices in the last one year. The chart shows the choppy consolidation period after the gold prices reached 1,035 levels in the beginning of 2008 and the short/intermediate term uptrend between October 2008 and March 2009. In the last 5 months, gold climbed from $700 levels to $1,005. During the uptrend, prices formed a clear parallel trend channel. Every rebound came from the lower boundary of the parallel trend channel. After breaking above the $920-$930 range, the price reached $1,005 and pulled back to the broken support/resistance level and the lower boundary of the parallel trend channel. $900 level was an important short/intermediate term support. After the FED meeting on the 19th of March, prices surged towards $950. The rebound came from the lower boundary of the parallel trend channel. More important is the level of the Bollinger Band Width indicator. The Bollinger Bands are expanding. An expansion of the Bollinger bands from extreme low levels signals a short/intermediate term trending period for Gold. We will follow the Bollinger Band Width indicator.

SILVER

The chart above analyzes the Silver prices between 2007 and 2009. On the chart we can see the strong rally that pushed prices towards 21 levels in the first quarter of 2008 and the sharp correction that reached 8.5 levels in only 7 months after the peak. Even though the two price actions were sharp and swift, there were clear set ups before these moves occurred. After finding support at 8.5 levels in December 2008, silver prices rebounded and formed a consolidation range between 10.20 and 11.70. The prices broke out of this range in January 2009 and rallied towards 14.50 levels. The breakout and the short term uptrend emerged from a low volatility period. The Bollinger bands were contracted. The expansion in the band width signaled a short term uptrend. After reaching 14.50 levels, prices pulled back to test the trend support at 12 levels. During the last week, Silver rebounded sharply from the lower boundary of its trend channel. The Bollinger Bands are expanding. An expansion of the Bollinger bands from extreme low levels signals a short/intermediate term trending period for Silver. We will follow the Bollinger Band Width indicator.

PLATINUM

Sideways trend is the horizontal price movement that occurs when the forces of supply and demand are nearly equal. A sideways trend is often regarded as a period of consolidation before the price continues in the direction of the previous move. After the breakout at 1,015 levels in February the price reached 1,119 levels and entered into a sideways trend above the broken support/resistance at 1,015. During the last week, increasing demand for precious metals pushed Platinum prices above its consolidation range. The breakout above 1,075 levels was followed by an expansion on the Bollinger bands. An expansion of the Bollinger bands from extreme low levels signals a short/intermediate term trending period for Platinum. We will follow the Bollinger Band Width indicator.

Aksel Kibar
Assistant Vice President/Portfolio Management
Abu Dhabi Investment Company
www.adic.ae

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