the practical implication of technical analysis with bollinger bands on empirical study on dhaka...

Research Paper

On

The practical implication of Technical analysis with Bollinger Bands on empirical study on

Dhaka Stock Exchange (DSE)

A Report on

The practical implication of Technical analysis with Bollinger Bands on empirical study on Dhaka Stock Exchange (DSE)

Prepared For

Chairman Department of Finance & Banking

Faculty of Business Studies

Prepared By

Khairuzzaman Mamun Student ID: 20113137

EMBA Program, Major in Finance & Banking Faculty of Business Administration

Jahangirnagar University Savar, Dhaka-1342

Date of Submission: 24th August, 2013

24th August, 2013 The Chairman Department of Finance & Banking Faculty of Business Studies Jahangirnagar University Savar, Dkaka-1342 Through: Mohammed Sawkat Hossain, Thesis Supervisor Subject: Submission of the Master Thesis on “The practical implication of Technical analysis with Bollinger Bands on empirical study on Dhaka Stock Exchange (DSE)” Dear Sir, It is my pleasure to submit the paper on “The practical implication of Technical analysis with Bollinger Bands on empirical study on Dhaka Stock Exchange (DSE)”. The paper is submitted as part of the partial fulfillment of the MBA program. The main purpose of this study is to verify the feasibility of Technical Analysis by Bollinger Bands on Dhaka Stock Exchange (DSE). The research paper is analyzed by the secondary data of the companies which are listed in the Dhaka Stock Exchange (DSE). In technical methods Bollinger Bands & % b indicators are used in the research paper. I am grateful to you for providing me the opportunity to have such an excellent experience. Sincerely, Khairuzzaman Mamun ID: 20113137 EMBA Program, Major in Finance & Banking

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Acknowledgement

From the core of my heart I would like to convey my earnest admiration, loyalty and reverence to the almighty Allah, the most merciful, for keeping everything in order and enabling me to complete this thesis successfully.

First let me express my thanks to my research supervisor Md.Sawkat Hossain, Department of Finance & Banking, Jahangirnagar University. He gives me my first introduction to the world about Technical analysis. It would be impossible for me to finish this research without his direction and encouragement. It has been a pleasure to have worked with him. His support, supervision and assistance will always be greatly appreciated.

I would like to especially thank Md. Tarikul Islam, Chairman, Department of Finance & Banking, Jahangirnagar University; Without his kind guidance, this thesis would have been impossible. I am grateful to the Dean of the Faculty of Business Studies, Jahangirnagar University, for allowing me to work on “The practical implication of Technical analysis with Bollinger Bands on empirical study on Dhaka Stock Exchange (DSE)”.

I also express my profound gratitude to all other teachers for their kind help and valuable suggestion. I also thank Jahangirnagar University and generally thank to the office staff for their collaboration. I am thankful and grateful to all the employees of Securities and Exchange Commission (SEC) and Dhaka Stock Exchange (DSE) for their help. I also recall, with gratitude, the patience they showed during my frequent interruptions in their regular jobs for answering my various queries.

Finally, I stretch out my heartiest love to my beloved mother, father, sister and brother during the progress of the thesis paper for their direct and indirect co-operation without which this study would be impossible.

Sincerely,

Khairuzzaman Mamun ID: 20113137 EMBA Program, Major in Finance & Banking

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Abstract

Any trader or investor gets benefits to analyze the market by using the method of technical analysis. Bollinger Bands is one of the most important indicators of technical analysis. In this study I have discussed easily about technical analysis, various types of indicators especially Bollinger Bands with example so that any new or old trader or investor can get understand about these fact. Then I have focus on practical implications where I have implemented Bollinger Bands as indicator to analyze ten listed companies of DSE. These ten companies are- LankaBangla Finance Ltd., Meghna Petroleum Ltd., United Airways (BD) Ltd., Jamuna Oil Company Ltd., Padma Oil Company Ltd., Active Fine Chemicals Ltd, Bangladesh Submarine Cable Company Ltd., Islami Bank Bangladesh Ltd., Square Pharmaceutical Ltd., & Titas Gas Transmission & Dist. Co. Ltd. I have also presented a regression analysis for each company. The regressions are done by two variables which are closing price of each company as dependent variable & Index of DSE as independent variable. These regression analyses are done to find dependence of company’s closing price on Index of DSE. Finally, I have presented the Bollinger Bands charts of Index of DSE to highlight the market condition of DSE.

At last I expect this study will be a conducive for any new or old trader or investor to analyze their markets.

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Table of Contents

Chapter Title Page Letter of Transmital i Acknowledgement ii Abstract iii Table of Contents iv List of Tables v List of charts vi 1 Introduction 01-03 Background 01 Problem Statement 02 Objectives 02 Methodology 02 Limitations 03 Report Layout 03 2 Technical Analysis 04-08 Introduction 04 Principles of Technical Analysis 05 Types of Share Price Movement 05 Types of overall trend under primary movements 05 Indicators of technical analysis 05 Types of indicators 06 Conclusion about Technical Analysis 08 3 Bollinger Bands 09-15 Introduction 09 Bollinger Bands consist of 09 Sharp charts calculation 09 The determinative parameter for BB 10 Estimation of market volatility 11 Classic bounce from Bollinger Bands lines 12 Bollinger Bands squeeze 13 Bandwidth & %b 14 Some additional advice 15 Conclusions about Bollinger Bands 15 4 Implementation & Analysis 16-47 Introduction 16 LankaBangla Finance Ltd. 17 Meghna Petroleum Ltd 20 United Airways (BD) Ltd 23 Jamun Oil Company Ltd 26 Padma Oil Company Ltd 29 Active Fine Chemicals Ltd 32 Bangladesh Submarine Cable Company Ltd 35 Islami Bank Bangladesh Ltd 38 Square Pharmaceuticals Ltd 41 Titas Gas Transmission & Dist. Co. Ltd 44 Dhaka Stock Exchange (DSE) 47 5 Findings & conclusions 50-51 6 References 52

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List of Tables

Table Title Page Table#1 Bollinger Bands (20, 2); LankaBangla Finance Ltd 17 Table#2 Model summery, ANOVA, Coefficients; LankaBangla Finance Ltd. 19 Table#3 Bollinger Bands (20, 2); Meghna Petroleum Ltd. 20 Table#4 Model summery, ANOVA, Coefficients; Meghna Petroleum Ltd. 22 Table#5 Bollinger Bands (20,2); United Airways (BD) Ltd. 23 Table#6 Model summery, ANOVA, Coefficients; United Airways (BD) Ltd. 25 Table#7 Bollinger Bands (20,2); Jamun Oil Company Ltd. 26 Table#8 Model summery, ANOVA, Coefficients; Jamun Oil Company Ltd. 28 Table#9 Bollinger Bands (20, 2); Padma Oil Company Ltd. 29 Table#10 Model summery, ANOVA, Coefficients; Padma Oil Company Ltd. 31 Table#11 Bollinger Bands (20,2); Active Fine Chemicals Ltd. 32 Table#12 Model summery, ANOVA, Coefficients; Active Fine Chemicals Ltd. 34 Table#13 Bollinger Bands (20,2); Bangladesh Submarine Cable Company Ltd. 35 Table#14 Model summery, ANOVA, Coefficients; Bangladesh Submarine Cable Co. Ltd. 37 Table#15 Bollinger Bands (20, 2); Islami Bank Bangladesh Ltd. 38 Table#16 Model summery, ANOVA, Coefficients; Islami Bank Bangladesh Ltd. 40 Table#17 Bollinger Bands (20, 2); Square Pharmaceuticals Ltd. 41 Table#18 Model summery, ANOVA, Coefficients; Square Pharmaceuticals Ltd. 43 Table#19 Bollinger Bands (20,2); Titas Gas Transmission & Dist. Co. Ltd. 44 Table#20 Model summery, ANOVA, Coefficients; Titas Gas Transmission & Dist. Co. Ltd. 46 Table#21 Bollinger Bands (20,2); Dhaka Stock Exchange (DSE) 47

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List of Charts

Chart Title Page Chart # i Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example 10 Chart # ii Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example 11 Chart # iii Closing Price Daily, 20-period/3-deviations Bollinger Bands; Example 12 Chart # iv Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example 12 Chart # v Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example 13 Chart # vi Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example 14 Chart #1 Closing Price Daily, 20-period/2-deviations Bollinger Bands; LankaBangla Finance Ltd 18 Chart #2 Daily Deviation of closing prices; LankaBangla Finance Ltd 18 Chart #3 Daily %b of Bollinger Bands; LankaBangla Finance Ltd 19 Chart #4 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Meghna Petroleum Ltd. 21 Chart #5 Daily Deviation of closing prices; Meghna Petroleum Ltd 21 Chart #6 Daily %b of Bollinger Bands; Meghna Petroleum Ltd 22 Chart #7 Closing Price Daily, 20-period/2-deviations Bollinger Bands; United Airways (BD) Ltd 24 Chart #8 Daily Deviation of closing prices; United Airways (BD) Ltd 24 Chart #9 Daily %b of Bollinger Bands; United Airways (BD) Ltd 25 Chart #10 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Jamun Oil Company Ltd 27 Chart #11 Daily Deviation of closing prices; Jamun Oil Company Ltd 27 Chart #12 Daily %b of Bollinger Bands; Jamun Oil Company Ltd 28 Chart #13 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Padma Oil Company Ltd 30 Chart #14 Daily Deviation of closing prices; Padma Oil Company Ltd 30 Chart #15 Daily %b of Bollinger Bands; Padma Oil Company Ltd 31 Chart #16 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Active Fine Chemicals Ltd 33 Chart #17 Daily Deviation of closing prices; Active Fine Chemicals Ltd 33 Chart #18 Daily %b of Bollinger Bands; Active Fine Chemicals Ltd 34 Chart #19 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Bangladesh Submarine Cable Company Ltd 36 Chart #20 Daily Deviation of closing prices; Bangladesh Submarine Cable Company Ltd 36 Chart #21 Daily %b of Bollinger Bands; Bangladesh Submarine Cable Company Ltd 37 Chart #22 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Islami Bank Bangladesh Ltd 39 Chart #23 Daily Deviation of closing prices; Islami Bank Bangladesh Ltd 39 Chart #24 Daily %b of Bollinger Bands; Islami Bank Bangladesh Ltd 40 Chart #25 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Square Pharmaceuticals Ltd 42 Chart #26 Daily Deviation of closing prices; Square Pharmaceuticals Ltd 42 Chart #27 Daily %b of Bollinger Bands; Square Pharmaceuticals Ltd 43 Chart #28 Closing Price Daily, 20-period/2-deviations Bollinger Bands; Titas Gas Transmission & Dist. Co. Ltd 45 Chart #29 Daily Deviation of closing prices; Titas Gas Transmission & Dist. Co. Ltd 45 Chart #30 Daily %b of Bollinger Bands; Titas Gas Transmission & Dist. Co. Ltd 46 Chart #31 Index of DSE, Daily, 20-period/2-deviations Bollinger Bands; Dhaka Stock Exchange (DSE) 48 Chart #32 Daily Deviation of Index of DSE; Dhaka Stock Exchange (DSE) 48 Chart #33 Daily %b of Bollinger Bands; Dhaka Stock Exchange (DSE) 49

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Chapter 1 Introduction

Background: The methods used to analyze securities and make investment decisions fall into two very broad categories: fundamental analysis and technical analysis. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn't care one bit about the "value" of a company or a commodity. Technicians (sometimes called chartists) are only interested in the price movements in the market. Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. Technical analysis and fundamental analysis are the two main schools of thought in the financial markets. Difference are-

1. A technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements. Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis. While technical analysis can be used on a timeframe of weeks, days or even minutes, fundamental analysis often looks at data over a number of years.

2. Not only is technical analysis more short term in nature than fundamental analysis, but the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for a trade, whereas fundamental analysis is used to make an investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price. The line between a trade and an investment can be blurry, but it does characterize a difference between the two schools.

Although technical analysis and fundamental analysis are seen by many as polar opposites - the oil and water of investing - many market participants have experienced great success by combining the two. For example, some fundamental analysts use technical analysis techniques to figure out the best time to enter into an undervalued security. Oftentimes, this situation occurs when the security is severely oversold. By timing entry into a security, the gains on the investment can be greatly improved. Alternatively, some technical traders might look at fundamentals to add strength to a technical signal. For example, if a sell signal is given through technical patterns and indicators, a technical trader might look to reaffirm his or her decision by looking at some key fundamental data. Oftentimes, having both the fundamentals and technical’s on your side can provide the best-case scenario for a trade.

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Problem Statement: Although Fundamental analysis is important in analyzing any security, I focus on technical analysis in share price movement of any security. There are many indicators for analyzing the share price movement of any security. Among them Bollinger Bands is another important indicator for analyzing any security. In this study I use Bollinger Bands as indicator to analyze some randomly selected securities of DSE. The main purpose of this study is to verify the feasibility of Technical Analysis by Bollinger Bands on Dhaka Stock Exchange (DSE) and to analyze securities price movement by using Bollinger Bands of Technical analysis. Objectives:

1. To verify the feasibility of Technical Analysis on Dhaka Stock Exchange (DSE) 2. To analyze securities price movement by using Bollinger Bands of Technical analysis. 3. To calculate moving average of price, deviation of price, upper band, & lower band. 4. To show their graphical representation. 5. To identify the upward and downward price movements of selected securities. 6. To calculate the value of %b & to show its graphical representation. 7. To forecast future price range & trend of each security.

Methodology: Research Design Now a day’s DSE is very frequent fluctuate market. Here all the data are historical. For this the given assumptions are built in the base of the historical data. All showed graphs are help to recognize the recent market. This study is very much authentic and realistic. For this any new investor or the old investor can take decision from it. So the research is design in the base of historical data and show the situation of the market. More over the market is now very unpredictable, so the analysis report is very much important for all. The study involved a secondary data about DSE, Dhaka, Bangladesh. Also the companies own website is also helpful for the research. Sources of Data: The data has been collected from Secondary sources. Secondary data sources: Secondary data, such as several academic articles and books have been analyzed to form and clarify the topic of the research, and thus to identify the key variables related to the response and attribution of the entrepreneur in the incidents of the Technical Analysis collecting from DSE and company information. The secondary data sources were- websites, books etc.

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Data collection procedure: The data was collected from the secondary market of DSE. Method of Analysis: For implementation & analysis I have taken closing prices of ten listed company then I have done some calculation with excel to find the moving average, deviation, upper band & lower band. Using these data I have found three charts for each company such as-

1. Closing Price Daily, 20-period/2-deviations Bollinger Bands 2. Daily Deviation of closing prices 3. Daily %b of Bollinger Bands

I have also presented a regression analysis for each company. The regressions are done by two variables which are closing price of each company as dependent variable & Index of DSE as independent variable. These regression analyses are done to find dependence of company’s closing price on Index of DSE.

Finally I have presented the Bollinger Bands charts of Index of DSE to highlight the market condition of DSE. Limitations:

I have taken daily closing price. If I would take longer period, results, interpretation & analysis may defer.

I have used Bollinger Bands as indicator. If I would take another indicator, then interpretation & analysis may defer.

Interpretation depends upon perception of chartists based on charts without considering other socio economical influencing factors.

The technical analysis failed to signal an uptrend or downtrend in time. Report Layout:

Chapter 1 gives background, methodology, objective and limitations of the report. Chapter 2 describes the Technical Analysis. Chapter 3 describes the Bollinger Bands Chapter 4 gives Implementation & Analysis Chapter 5 highlights findings & conclusions Chapter 6 gives reference

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Chapter 2 Technical Analysis

Introduction:

Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is "likely" to happen to prices over time. Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

Just as there are many investment styles on the fundamental side, there are also many different types of technical traders. Some rely on chart patterns; others use technical indicators and oscillators, and most use some combination of the two. In any case, technical analysts' exclusive use of historical price and volume data is what separates them from their fundamental counterparts. Unlike fundamental analysts, technical analysts don't care whether a stock is undervalued - the only thing that matters is a security's past trading data and what information this data can provide about where the security might move in the future. The field of technical analysis is based on three assumptions:

1. The Market Discounts Everything: A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company. However, technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors. Technical analysts believe that the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market.

2. Price Moves in Trends: In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical trading strategies are based on this assumption.

3. History Tends To Repeat Itself: Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Technical

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analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.

Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of supply and demand.

Principles of Technical Analysis:

1. Demand and supply factors 2. Rational and irrational factors 3. Continuous in particular direction 4. Shift of Demand and supply factors 5. Charts representing market action 6. Patterns to forecast forwarded share price

Types of Share Price Movement:

1. Tertiary Movement – [Day to day movement] 2. Secondary Movement – [A number of weeks or month] 3. Primary Movement – [Period of several months or years]

Types of overall trend under primary movements: There are two types of overall trend under primary movements

1. Bullish Trend 2. Bearish Trend

Bullish Trend: Three phases of a bullish market - revival of confidence, improvement of corporate earnings, speculation & inflation. Bearish Trend: Three phases of a bearish market-abandonment of hopes, low profits and dividends, further distress selling.

Indicators of technical analysis:

Indicators are calculations based on the price and the volume of a security that measure such things as money flow, trends, volatility and momentum. Indicators are used as a secondary measure to the actual price movements and add additional information to the analysis of securities. Indicators are used in two main ways:

1. to confirm price movement and the quality of chart patterns, and 2. To form buy and sell signals.

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Types of indicators:

There are many types of indicators as follows:

Trend Indicators: Trend indicators reflect three tendencies in price movements: Up moves, down moves and sideways price moves. These indicators help define prevailing directions/ trends of the price moves by smoothing price data over a certain period of time. In simple words, Trend indicators allow us to visualize Trends in the market.

1. Ichimoku Kinko Hyo 2. Advance Decline Line (ADL) 3. Average Directional Index (ADX) 4. Average Directional Movement Index Rating (ADXR) 5. Commodity Selection Index (CSI) 6. Directional Movement Index (DMI) 7. Double Exponential Moving Average (DEMA) 8. Heiken Ashi 9. Moving Average Convergence and Divergence (MACD) 10. Moving Averages: EMA, SMA and WMA 11. Parabolic SAR 12. Percentage Price Oscillator (PPO) 13. Point & Figure 14. Triple Exponential Moving Average (TEMA) 15. Triple Exponential Moving Average (TRIX)

Momentum Indicators: Momentum indicators show the strength of trends by recording the speed of prices moving over certain time period. At the same time, Momentum indicators track strength and weakness of a trend as it progresses over a given period of time: the highest momentum is always registered at the beginning of a trend, the lowest - at its end point.

1. Accumulative Swing Index (ASI) 2. Advance Decline Ratio (ADR) 3. Aroon Indicator 4. Aroon Oscillator 5. Chande Momentum Oscillator 6. Commodity Channel Index (CCI) 7. Intraday Momentum Index 8. Centre of Gravity 9. Linear Regression Slope 10. Mass Index 11. Momentum Indicator 12. Price Oscillator 13. Qstick 14. Random Walk Index 15. Rate of Change (ROC) 16. Relative Momentum Index (RMI)

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17. Relative Strength Index (RSI) 18. Smoothed Indexed Rate of Change (SIROC) 19. Stochastics 20. Stochastic RSI 21. Stochastic Momentum Index 22. Ultimate Oscillator 23. Williams %R 24. Williams' Accumulation-Distribution

Volatility Indicators: Volatility indicators show the size and the magnitude of price fluctuations. In any market there are periods of high volatility (high intensity) and low volatility (low intensity). These periods come in waves: low volatility is replaced by increasing volatility, while after a period of high volatility there comes a period of low volatility and so on. Volatility indicators measure the intensity of price fluctuations, providing an insight into the market activity level.

1. Average True Range (ATR) 2. Bollinger Bands (BB) 3. Chaikin Volatility (CHV) 4. Donchian Channel 5. Keltner Bands 6. McGinley Dynamic indicator (MDI) 7. Moving Average Envelopes 8. Starc Bands

Volume Indicators: Volume indicators are used to determine investors' interest in the market. High volume, especially near important market levels, suggests a possible start of a new trend, while low volume suggests trader’s uncertainty and/or no interest in a particular market.

1. Acceleration Bands 2. Market Facilitation Index 3. Chaikin Money Flow (CMF) 4. Chaikin Oscillator 5. Accumulation Distribution Oscillator (ADO) 6. Volume Oscillator (PVO) 7. Demand Index 8. On Balance Volume (OBV) 9. Money Flow

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Cycle Indicators: A cycle in the market is determined by a series of repeating patterns. These patterns are, as a rule, dedicated to certain market events, such as seasons, simple day counts, event-to-event sequence, market theories and formulas and so on.

1. Detrended Price Oscillator (DPO) 2. Elliott waves 3. Schaff Trend Cycle 4. Fibonacci 5. Fourier Transform

Conclusions about Technical analysis:

Technical analysts consider the market to be 80% psychological and 20% logical. Fundamental analysts consider the market to be 20% psychological and 80% logical. Psychological or logical may be open for debate, but there is no questioning the current price of a security. Technical analysis focuses directly on the bottom line: What is the price? Where has it been? Where is it going?

In this study I use Bollinger Bands as indicator to analyze some our randomly selected securities of DSE, so I am presenting a brief about this indicator in the next chapter.

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Chapter 3 Bollinger Bands

Introduction:

Bollinger Bands is a technical analysis tool invented by John Bollinger in the 1980s, and a term trademarked by him in 2011. Having evolved from the concept of trading bands, Bollinger Bands and the related indicators %b and bandwidth can be used to measure the "highness" or "lowness" of the price relative to previous trades. Bollinger Bands are a volatility indicator similar to the Keltner channel. Bollinger Bands is a versatile tool combining moving averages and standard deviations and is one of the most popular technical analysis tools available for traders.

Bollinger Bands consist of:

Bollinger Bands consist of a middle band with two outer bands. The middle band is a simple moving average that is usually set at 20 periods. A simple moving average is used because the standard deviation formula also uses a simple moving average. The look-back period for the standard deviation is the same as for the simple moving average. The outer bands are usually set 2 standard deviations above and below the middle band. These are listed below-

1. an N-period moving average (MA) 2. an upper band at K times an N-period standard deviation above the moving average

(MA + Kσ) 3. a lower band at K times an N-period standard deviation below the moving average

(MA − Kσ)

Typical values for N and K are 20 and 2, respectively. The default choice for the average is a simple moving average, but other types of averages can be employed as needed. Exponential moving averages are a common second choice. Usually the same period is used for both the middle band and the calculation of standard deviation.

Sharp Charts Calculation: 1. Middle Band = 20-day simple moving average (SMA) 2. Upper Band = 20-day SMA + (20-day standard deviation of price x 2) 3. Lower Band = 20-day SMA - (20-day standard deviation of price x 2)

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Chart # i | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example

Bollinger Bands, however, are created by calculating two standard deviations above and below a 20-day simple moving average. Therefore, the price should remain within the bands about 95% of the time.

The determinative parameter for BB:

In general, the determinative parameter for BB is the period/type of MA, because bands are derivative lines from the MA parameter. The major value for trading of this indicator is in bands. Normal distribution suggests that some variable – in our case this is price, will stay in a range of two standard deviations with a probability ~95%, in range of three standard deviations with a probability more than 99%.

1. MA – period, its type and type of price – close, high, low, etc. 2. Number of standard deviations. The greater this parameter – the wider band lines, and the

less probable that market will touch it. In most cases there is not much sense to apply more than 3 standard deviations.

We should keep in mind, that applying 2 deviations tells that price action will be inside the bands with probability 95%, 3 standard deviations – 99%. So, market will touch the bands very rarely.

If applying of 3 deviations suggests, that price will have to remain between the bands with 99% probability, and market occasionally touches upper or lower band.

The MA period has the same sense as in a simple MA. The longer the MA-period, the more smooth and lazy these MA & BB lines. Also they will be wider. In fact, this is the same sensitivity to most recent price action – if you appoint a short period, then bands of BB will be

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very sensitive to price behavior and looks like kinked curves. If you appoint greater period – the line will be smoother and bands range will be wider.

Because there is direct correlation between the deviation and the period, Just to keep it simple – the greater the period, the greater the volatility and deviation. So as deviation is greater – the distance between bands is also wider.

1. Estimation of market volatility:

In general, when the market is calm and quiet – volatility decreases, hence deviation of price from its average also becomes less, and… At the same reasoning the distance between bands becomes greater, when the market turns in sloppy price action or in an impulse and thrusting move.

Chart # ii | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example

Here you can see – when the market was calm – the distance between the lines was tighter. In March, market fluctuations became wider, hence, volatility was increased and the distance between BB bands then expanded. During the collapse in April, the market was really loud – the bands’ distance has become really wide.

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Partially it because of just 2 deviations application Look, how it will be, if we apply 3 deviations:

Chart # iii | Closing Price Daily, 20-period/3-deviations Bollinger Bands; Example

I even have had to eliminate some points, where price previously touched the bands.

2. Classic bounce from Bollinger Bands lines:

As we’ve noted already, due to math laws, price tends to return to the middle of the bands. According to normal distribution, when price reaches any of the bands – it becomes stretched, like a spring and tends to move right back. So, the bands of BB indicator acts like support and resistance:

Chart # iv | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example

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The whole idea behind the Bollinger bounce is that price tends to return to the middle of the bands.

The longer the time frame you are in, the stronger these bands tend to be. Many traders have developed systems that thrive on these bounces and this strategy is best used when the market is ranging and there is no clear trend.

3. Bollinger Bands squeeze:

This method works better when you give market more room for breathing by appointing just 2 deviations. Why? Because the market has 5 times greater probability to move outside the bands –5 % against ~ 1% when 3 deviations appointed.

Chart # v | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example

Here we can see that bands squeeze tightly and move almost parallel, range between them is stable. This is an early caution about potential breakout.

Because, calm and very harmonic movement of bands and a tight range between them tell us, that volatility extremely stable. This couldn’t hold too long. Tight range between bands tells, in turn, that volatility is low. This combination tells, that market in extremely calm period - it couldn’t hold too long. Extreme calming is unnatural for markets and this could lead only to a single scenario – growth of volatility and breakout.

So, when market shows a close below some band – this is the most probable direction of the breakout. Especially if it shows a number of closes in this direction. On our chart this is a close below the lower band – hence, we should expect breakout to the downside:

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Chart # vi | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Example

In general this approach could be used to identify the starting of new strong move as soon as possible. But, as you understand, you will not see such action very often.

Bandwidth & %b:

In spring of 2010, John Bollinger introduced three new indicators based on Bollinger Bands. They are BB-Impulse, which measures price change as a function of the bands, percent bandwidth (%b), which normalizes the width of the bands over time, and bandwidth delta, which quantifies the changing width of the bands.

%b (pronounced "percent b") is derived from the formula: %b = (Price - Lower Band)/ (Upper Band - Lower Band)

%B quantifies a security's price relative to the upper and lower Bollinger Band. There are six basic relationship levels:

1. %b equals 1 when price is at the upper band 2. %b equals 0 when price is at the lower band 3. %b is above 1 when price is above the upper band 4. %b is below 0 when price is below the lower band 5. %b is above .50 when price is above the middle band (20-day SMA) 6. %b is below .50 when price is below the middle band (20-day SMA)

Bandwidth tells how wide the Bollinger Bands are on a normalized basis. Writing the same symbols as before, and middle BB for the moving average, or middle Bollinger Band: Bandwidth = (upper BB – lower BB) / middle BB.

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Some additional advice:

1. If the market penetrates BB band and couldn’t reach the MA line – middle of the range between the bands, then it tells about power of the market in this direction and that the previous move has a solid odds to continue. Just look at chart # vi – market penetrates lower band, but was not able to return even to MA line. Then, the move down continues…;

2. BB bands, especially by applying 2.5-3 deviations and about 20-period could be used as an indicator of overbought/oversold levels and conditions on the market. When the market touches the upper band – the market is overbought, when it touches the lower one – oversold. It is preferable to apply this method not lower than on the daily time frame. A combination of Oversold+ Fib support or Overbought + Fib Resistance has a greater probability to stop the market for some time.

3. BB bands could save you from unwelcome areas to enter the market. It’s safer to buy in the lower half of the range, and Sell in the higher half of the range. Also avoid entering the market, when it stands at the bands – long at higher band, and short at lower band. Because, as we’ve said already – there is a high probability of bouncing in the middle of the range.

4. AS with any other indicator, BB demands fine tuning, by analyzing its application with different pairs and time frames. You should find parameters that most suitable for your trading style and pairs that you trade.

You may apply different variations of the tools that I’ve pointed out. For instance – I said “if the market shows close outside of some band”. You instead could apply not one but 2 or 3 closes. The akin variations are allowed in other strategies with BB. Be free to experiment with the parameters you use, confirmation signals and other things! Your task is to find out how to make more pips on the market. And there is nothing forbidden with any indicator.

Conclusions about Bollinger Bands: Even though Bollinger Bands can help generate buy and sell signals, they are not designed to determine the future direction of a security. Bollinger Bands serve two primary functions:

1. To identify periods of high and low volatility 2. To identify periods when prices are at extreme, and possibly unsustainable, levels.

Remember that buy and sell signals are not given when prices reach the upper or lower bands. Such levels merely indicate that prices are high or low on a relative basis. A security can become overbought or oversold for an extended period of time. Finally, the bands are just bands, not signals. A band of the upper Bollinger Band is NOT a sell signal. A band of the lower Bollinger Band is NOT a buy signal.

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Chapter 4

Implementations & Analysis

Introduction:

For implementation & analysis I have taken closing prices of ten listed company then I have done some calculation with excel to find the moving average, deviation, upper band & lower band. Using these data I have found three charts for each company such as-

4. Closing Price Daily, 20-period/2-deviations Bollinger Bands 5. Daily Deviation of closing prices 6. Daily %b of Bollinger Bands

Then I have presented some analysis on these charts.

The selected companies are shown below:

1. LankaBangla Finance Ltd. 2. Meghna Petroleum Ltd. 3. United Airways (BD) Ltd. 4. Jamuna Oil Company Ltd. 5. Padma Oil Company Ltd. 6. Active Fine Chemicals Ltd 7. Bangladesh Submarine Cable Company Ltd. 8. Islami Bank Bangladesh Ltd. 9. Square Pharmaceutical Ltd. 10. Titas Gas Transmission & Dist. Co. Ltd.

I have also presented a regression analysis for each company. The regressions are done by two variables which are closing price of each company as dependent variable & Index of DSE as independent variable. These regression analyses are done to find dependence of company’s closing price on Index of DSE.

Finally I have presented the Bollinger Bands charts of Index of DSE to highlight the market condition of DSE.

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LankaBangla Finance Ltd.

Table#1 | Bollinger Bands (20, 2); LankaBangla Finance Ltd Date Index of DSE Price Deviation MB UB LB %b

20 10-Mar 3873.4627 44.80 4.16 63.90 72.23 55.57 -0.65

21 11-Mar 3842.3208 43.50 5.41 63.00 73.82 52.18 -0.40

22 12-Mar 3872.53685 43.20 6.33 62.14 74.81 49.48 -0.25

23 13-Mar 3925.21483 43.00 7.15 61.29 75.59 46.99 -0.14

24 14-Mar 3935.96284 43.70 7.84 60.47 76.15 44.78 -0.03

25 18-Mar 3947.73951 41.50 8.57 59.38 76.52 42.23 -0.02

26 19-Mar 3976.90071 43.00 9.01 58.13 76.14 40.11 0.08

27 20-Mar 3938.50698 43.30 9.28 56.88 75.44 38.31 0.13

28 24-Mar 3860.12996 41.20 9.39 55.70 74.47 36.93 0.11

29 25-Mar 3818.30024 40.50 9.50 54.43 73.42 35.43 0.13

30 27-Mar 3749.07538 40.00 9.25 53.16 71.65 34.67 0.14

31 28-Mar 3794.29306 40.50 8.83 51.93 69.59 34.27 0.18

32 31-Mar 3722.4099 39.70 8.36 51.15 67.86 34.43 0.16

33 1-Apr 3610.42597 37.30 7.95 49.89 65.79 33.99 0.10

34 2-Apr 3654.74755 38.20 7.55 48.69 63.78 33.60 0.15

35 3-Apr 3673.50875 38.30 7.13 47.55 61.82 33.29 0.18

36 4-Apr 3657.03935 38.50 6.56 46.48 59.61 33.35 0.20

37 7-Apr 3650.67727 38.70 5.66 45.33 56.64 34.01 0.21

38 8-Apr 3665.42193 39.00 4.97 44.20 54.14 34.26 0.24

39 9-Apr 3732.64714 40.00 3.83 43.13 50.80 35.47 0.30

40 10-Apr 3738.70201 39.80 3.00 42.31 48.31 36.30 0.29

41 11-Apr 3720.35661 38.90 2.72 41.77 47.22 36.33 0.24

42 15-Apr 3763.718 39.90 2.43 41.31 46.17 36.45 0.36

43 16-Apr 3698.73459 38.20 2.22 40.94 45.39 36.50 0.19

44 17-Apr 3701.89123 38.00 2.03 40.69 44.76 36.62 0.17

45 18-Apr 3707.48882 37.20 1.93 40.49 44.36 36.63 0.07

46 21-Apr 3666.98597 36.70 1.85 40.27 43.97 36.57 0.02

47 22-Apr 3660.87855 35.80 1.74 40.11 43.58 36.63 -0.12

48 23-Apr 3662.4067 35.40 1.56 39.82 42.94 36.69 -0.21

49 24-Apr 3660.5968 34.70 1.56 39.63 42.75 36.51 -0.29

50 25-Apr 3653.88236 33.70 1.43 39.33 42.19 36.46 -0.48

51 26-Apr 3620.89462 33.20 1.21 38.98 41.40 36.56 -0.69

52 29-Apr 3617.35462 33.00 1.37 38.82 41.56 36.08 -0.56

53 30-Apr 3618.48659 33.40 1.45 38.53 41.42 35.64 -0.39

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Chart #1 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; LankaBangla Finance Ltd

Chart #2 | Daily Deviation of closing prices; LankaBangla Finance Ltd

Here we can see from chart#1 & chart#2- In March, market fluctuations became wider, hence, volatility was increased and the distance between BB bands then expanded. After the 23rd March the market was gradually becoming calm. During the collapse in April, the market was really calm – the bands’ distance between the lines was really tighter. Here we can see that bands squeeze tightly and move almost parallel, range between them is stable. This is an early caution about potential breakout. Because, calm and very harmonic movement of bands and a tight range between them tell us, that volatility extremely stable. This couldn’t hold too long. Extreme calming is unnatural for markets and this could lead only to a breakout. On 20th April, it has occurred and it may continue.

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Chart #3 | Daily %b of Bollinger Bands; LankaBangla Finance Ltd

Since, we know that %b is below 0 when price is below the lower band. So from chart#3 we see that in 18th March and 21st April the price line breakout the lower band and still now the price is below the lower band.

Regression analysis:

I have taken 34 days price of LankaBangla Finance Ltd and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#2 | Model summery, ANOVA, Coefficients

Table#2 | Model summery, ANOVA, Coefficients; LankaBangla Finance LtdModel summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig 0.870 0.756 99.232 0.000 Constant -56.179 9.558 -5.878 0.000

INDEX 0.025 0.003 9.962 0.000 From the table we see that 75.6% of the variation of price of LankaBangla Finance Ltd can be explained by the Index of DSE and the sensitivity of the price of LankaBangla Finance Ltd to Index of DSE is 0.025, that is, if the Index of DSE will be increased by Tk. 1/- then price of LankaBangla Finance Ltd will be increased by Tk. 0.025/-.

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7‐Mar 17‐Mar 27‐Mar 6‐Apr 16‐Apr 26‐Apr 6‐May %b

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Meghna Petroleum Ltd. Table#3 | Bollinger Bands (20, 2); Meghna Petroleum Ltd. Date Index of DSE Price Deviation MB UB LB %b

20 10-Mar 3873.4627 163.50 5.79 170.38 181.96 158.79 0.20

21 11-Mar 3842.3208 164.90 5.81 170.01 181.63 158.38 0.28

22 12-Mar 3872.53685 166.70 5.82 169.66 181.31 158.01 0.37

23 13-Mar 3925.21483 168.90 5.80 169.37 180.97 157.78 0.48

24 14-Mar 3935.96284 168.90 5.79 169.08 180.67 157.49 0.49

25 18-Mar 3947.73951 170.30 5.65 168.54 179.83 157.24 0.58

26 19-Mar 3976.90071 172.40 5.52 168.18 179.22 157.13 0.69

27 20-Mar 3938.50698 172.10 5.29 167.87 178.45 157.28 0.70

28 24-Mar 3860.12996 168.10 5.11 167.61 177.83 157.39 0.52

29 25-Mar 3818.30024 166.90 4.67 167.27 176.60 157.93 0.48

30 27-Mar 3749.07538 166.00 4.33 167.06 175.73 158.39 0.44

31 28-Mar 3794.29306 167.20 3.98 166.86 174.81 158.90 0.52

32 31-Mar 3722.4099 167.20 3.59 166.42 173.61 159.24 0.55

33 1-Apr 3610.42597 162.40 3.20 166.13 172.54 159.73 0.21

34 2-Apr 3654.74755 165.00 3.16 166.05 172.38 159.73 0.42

35 3-Apr 3673.50875 166.30 3.04 166.25 172.32 160.17 0.50

36 4-Apr 3657.03935 166.40 3.04 166.33 172.41 160.24 0.51

37 7-Apr 3650.67727 166.50 2.94 166.55 172.43 160.68 0.50

38 8-Apr 3665.42193 167.80 2.97 166.53 172.46 160.60 0.61

39 9-Apr 3732.64714 169.00 2.79 166.69 172.28 161.10 0.71

40 10-Apr 3738.70201 169.50 2.75 166.78 172.28 161.29 0.75

41 11-Apr 3720.35661 169.60 2.68 166.91 172.26 161.55 0.75

42 15-Apr 3763.718 170.30 2.58 167.05 172.21 161.89 0.82

43 16-Apr 3698.73459 167.50 2.49 167.24 172.22 162.25 0.53

44 17-Apr 3701.89123 167.50 2.36 167.53 172.24 162.81 0.50

45 18-Apr 3707.48882 167.50 2.31 167.77 172.39 163.14 0.47

46 21-Apr 3666.98597 167.00 2.33 167.92 172.59 163.26 0.40

47 22-Apr 3660.87855 166.20 2.38 167.99 172.76 163.23 0.31

48 23-Apr 3662.4067 166.20 2.38 167.92 172.67 163.17 0.32

49 24-Apr 3660.5968 165.70 2.31 167.77 172.39 163.15 0.28

50 25-Apr 3653.88236 166.40 2.04 167.52 171.59 163.44 0.36

51 26-Apr 3620.89462 165.90 1.73 167.25 170.70 163.79 0.30

52 29-Apr 3617.35462 165.50 1.70 167.20 170.59 163.80 0.25

53 30-Apr 3618.48659 166.40 1.70 167.10 170.50 163.70 0.40

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Chart #4 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Meghna Petroleum Ltd.

Chart #5 | Daily Deviation of closing prices; Meghna Petroleum Ltd

Here we can see from chart#4 & chart#5- prior to the March, market fluctuations became wider, hence, volatility was increased and the distance between BB bands then expanded. But during the March & April the market was gradually becoming calm. During the collapse in April, the market was really calm – the bands’ distance between the lines was really tighter. Here we can see that bands squeeze tightly and move almost parallel, range between them is stable. This is an early caution about potential breakout.

Again, from chart# 4 we have noticed that there is a classic bounce from Bollinger Bands lines and price tends to return to the middle of the bands. So, the bands of BB indicator acts like support and resistance & it indicates that there is less probability of breakout.

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Chart #6 | Daily %b of Bollinger Bands; Meghna Petroleum Ltd

Since, from chart#6 we see that the value of %b is always in between 0.20 to 0.82. So the price always remains between bands. Again the last value of %b is 0.40 which indicate that the price is near the meddle line.


I have taken 34 days price of Meghna Petroleum Ltd and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#4 | Model summery, ANOVA, Coefficients.

Table#4 | Model summery, ANOVA, Coefficients; Meghna Petroleum Ltd Model summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig

0.571(a) 0.326 15.470 0.000(a) Constant 126.013 10.498 12.004 0.000 INDEX 0.011 0.003 3.933 0.000

From the table we see that 32.6% of the variation of price of Meghna Petroleum Ltd can be explained by the Index of DSE and the sensitivity of the price of Meghna Petroleum Ltd to Index of DSE is 0.011, that is, if the Index of DSE will be increased by Tk. 1/- then price of Meghna Petroleum Ltd will be increased by Tk. 0.011/-.

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United Airways (BD) Ltd

Table#5 | Bollinger Bands (20,2); United Airways (BD) Ltd

Date Index of DSE Price Deviation MB UB LB %b

20 10-Mar 3873.4627 19.20 1.43 22.54 25.40 19.67 -0.08

21 11-Mar 3842.3208 18.90 1.51 22.39 25.41 19.36 -0.08

22 12-Mar 3872.53685 18.80 1.60 22.23 25.44 19.03 -0.04

23 13-Mar 3925.21483 19.20 1.68 22.08 25.45 18.72 0.07

24 14-Mar 3935.96284 19.20 1.76 21.94 25.45 18.43 0.11

25 18-Mar 3947.73951 19.20 1.81 21.69 25.30 18.07 0.16

26 19-Mar 3976.90071 19.30 1.85 21.44 25.14 17.74 0.21

27 20-Mar 3938.50698 18.90 1.85 21.23 24.94 17.52 0.19

28 24-Mar 3860.12996 18.40 1.77 20.98 24.52 17.44 0.14

29 25-Mar 3818.30024 18.00 1.69 20.75 24.13 17.37 0.09

30 27-Mar 3749.07538 17.30 1.60 20.55 23.75 17.34 -0.01

31 28-Mar 3794.29306 17.60 1.50 20.32 23.31 17.33 0.05

32 31-Mar 3722.4099 17.10 1.30 20.14 22.73 17.54 -0.08

33 1-Apr 3610.42597 15.90 1.12 19.88 22.12 17.64 -0.39

34 2-Apr 3654.74755 16.60 1.05 19.66 21.76 17.56 -0.23

35 3-Apr 3673.50875 18.10 1.08 19.44 21.60 17.27 0.19

36 4-Apr 3657.03935 17.60 0.97 19.21 21.15 17.26 0.09

37 7-Apr 3650.67727 17.60 0.97 18.99 20.94 17.05 0.14

38 8-Apr 3665.42193 18.00 1.08 18.73 20.89 16.57 0.33

39 9-Apr 3732.64714 18.80 1.17 18.58 20.92 16.25 0.55

40 10-Apr 3738.70201 18.70 1.08 18.46 20.62 16.29 0.56

41 11-Apr 3720.35661 18.60 1.03 18.33 20.40 16.26 0.56

42 15-Apr 3763.718 19.20 1.00 18.23 20.23 16.23 0.74

43 16-Apr 3698.73459 18.50 0.96 18.15 20.08 16.23 0.59

44 17-Apr 3701.89123 18.60 0.94 18.13 20.02 16.25 0.62

45 18-Apr 3707.48882 18.50 0.94 18.12 19.99 16.25 0.60

46 21-Apr 3666.98597 18.40 0.93 18.11 19.97 16.25 0.58

47 22-Apr 3660.87855 18.10 0.93 18.11 19.97 16.25 0.50

48 23-Apr 3662.4067 18.00 0.90 18.07 19.87 16.28 0.48

49 24-Apr 3660.5968 17.80 0.87 18.04 19.78 16.31 0.43

50 25-Apr 3653.88236 17.80 0.82 18.00 19.65 16.35 0.44

51 26-Apr 3620.89462 17.50 0.80 17.97 19.58 16.37 0.35

52 29-Apr 3617.35462 17.60 0.78 17.98 19.55 16.41 0.38

53 30-Apr 3618.48659 17.10 0.78 17.96 19.51 16.41 0.22

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Chart #7 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; United Airways (BD) Ltd

Chart #8 | Daily Deviation of closing prices; United Airways (BD) Ltd

Here we can see from chart#7 & chart#8- during the March, volatility was increased and the distance between BB bands then expanded. But during the April the volatility gradually became stable and, hence, the bands’ distance between the lines was really tighter. Here we can see that bands squeeze tightly and move almost parallel, range between them is stable. This is an early caution about potential breakout.

Again, from chart# 7, in April we have noticed that there occurred a classic bounce from Bollinger Bands lines and price tends to return to the middle of the bands. So, the bands of BB indicator acts like support and resistance & it indicates that there is less probability of breakout.

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Chart #9 | Daily %b of Bollinger Bands; United Airways (BD) Ltd

Since, we know that %b is below 0 when price is below the lower band. So from chart#9 we see that there is two breakout of the lower band which occurred prior to the 12th March & after the 29th March. Again the last value of %b is 0.20 which indicate that the price is near the lower band.

Regression analysis

I have taken 34 days price of United Airways (BD) Ltd and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#6 | Model summery, ANOVA, Coefficients

Table#6 | Model summery, ANOVA, Coefficients; United Airways (BD) Ltd

Model summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig

0.718(a) 0.516 34.054 0.000(a) Constant -1.640 3.398 -0.483 0.633 INDEX 0.005 0.001 5.836 0.000

From the table we see that 51.6% of the variation of price of United Airways (BD) Ltd can be explained by the Index of DSE and the sensitivity of the price of United Airways (BD) Ltd to Index of DSE is 0.005, that is, if the Index of DSE will be increased by Tk. 1/- then price of United Airways (BD) Ltd will be increased by Tk. 0.005/-.

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Jamun Oil Company Ltd

Table#7 | Bollinger Bands (20,2); Jamun Oil Company Ltd


20 10-Mar 3873.4627 164.80 6.95 173.36 187.27 159.46 0.19

21 11-Mar 3842.3208 165.50 7.10 172.81 187.00 158.62 0.24

22 12-Mar 3872.53685 168.20 7.17 172.33 186.68 157.99 0.36

23 13-Mar 3925.21483 173.90 7.19 171.93 186.31 157.56 0.57

24 14-Mar 3935.96284 174.60 7.18 171.58 185.93 157.22 0.61

25 18-Mar 3947.73951 175.30 6.85 170.74 184.45 157.03 0.67

26 19-Mar 3976.90071 177.70 6.55 170.16 183.25 157.07 0.79

27 20-Mar 3938.50698 176.50 6.26 169.89 182.41 157.36 0.76

28 24-Mar 3860.12996 174.70 6.01 169.67 181.69 157.64 0.71

29 25-Mar 3818.30024 172.70 5.60 169.39 180.58 158.19 0.65

30 27-Mar 3749.07538 171.50 5.41 169.28 180.09 158.46 0.60

31 28-Mar 3794.29306 174.40 5.19 169.14 179.52 158.76 0.75

32 31-Mar 3722.4099 175.00 4.87 168.66 178.39 158.93 0.83

33 1-Apr 3610.42597 172.00 4.92 168.71 178.55 158.86 0.67

34 2-Apr 3654.74755 174.30 5.00 168.87 178.86 158.87 0.77

35 3-Apr 3673.50875 175.00 5.01 169.11 179.13 159.08 0.79

36 4-Apr 3657.03935 175.20 5.14 169.45 179.72 159.17 0.78

37 7-Apr 3650.67727 176.50 5.17 169.97 180.31 159.63 0.82

38 8-Apr 3665.42193 177.80 5.08 170.31 180.47 160.15 0.87

39 9-Apr 3732.64714 180.00 4.75 170.96 180.46 161.46 0.98

40 10-Apr 3738.70201 177.50 4.55 171.53 180.63 162.42 0.83

41 11-Apr 3720.35661 175.30 4.25 172.12 180.62 163.61 0.69

42 15-Apr 3763.718 176.90 3.92 172.76 180.61 164.92 0.76

43 16-Apr 3698.73459 174.70 3.58 173.45 180.61 166.29 0.59

44 17-Apr 3701.89123 174.90 3.24 174.25 180.73 167.77 0.55

45 18-Apr 3707.48882 175.00 2.57 174.88 180.03 169.74 0.51

46 21-Apr 3666.98597 174.20 2.04 175.26 179.33 171.19 0.37

47 22-Apr 3660.87855 172.40 2.04 175.42 179.50 171.34 0.13

48 23-Apr 3662.4067 171.80 2.04 175.42 179.50 171.35 0.06

49 24-Apr 3660.5968 171.80 2.04 175.40 179.48 171.32 0.06

50 25-Apr 3653.88236 171.80 1.97 175.26 179.20 171.32 0.06

51 26-Apr 3620.89462 172.00 1.96 175.14 179.06 171.22 0.10

52 29-Apr 3617.35462 172.30 2.00 175.00 179.00 171.00 0.16

53 30-Apr 3618.48659 172.30 2.12 174.86 179.09 170.62 0.20

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Chart #10 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Jamun Oil Company Ltd

Chart #11 | Daily Deviation of closing prices; Jamun Oil Company Ltd

Here we can see from chart#10 & chart#11- the deviation was gradually decreasing and, hence, the bands’ distance between the lines was gradually decreasing. After 18th April, we can see that bands squeeze tightly and move almost parallel, range between them is stable, but prior to the 18th April bands distance was expanded. This combination tells that market is in extremely calm period - it couldn’t hold too long. Extreme calming is unnatural for markets and this could lead only to a single scenario – growth of volatility and breakout.

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Chart #12 | Daily %b of Bollinger Bands; Jamun Oil Company Ltd

Since, from chart#12 we see that the value of %b is always in between 0.00 to 1.00. So the price always remains between bands & never touches the bands. Again the last value of %b is 0.20 which indicate that the price is near the lower line.


I have taken 34 days price of Jamuna oil company Ltd and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#8 | Model summery, ANOVA, Coefficients

Table#8 | Model summery, ANOVA, Coefficients; Jamun Oil Company LtdModel summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig

0.030(a) 0.001 0.028 0.867(a) Constant 176.979 18.963 9.333 0.000 INDEX -0.001 0.005 -0.169 0.867

From the table we see that 0.1% of the variation of price of Jamuna oil company Ltd can be explained by the Index of DSE and the sensitivity of the price of Jamuna oil company Ltd to Index of DSE is -0.001, that is, if the Index of DSE will be increased by Tk. 1/- then price of Jamuna oil company Ltd will be increased by Tk. -0.001/-.

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%b

29 | P a g e

Padma Oil Company Ltd Table#9 | Bollinger Bands (20, 2); Padma Oil Company Ltd

Date Index of DSE

Price Deviation MB UB LB %b

20 10-Mar 3873.4627 174.10 7.80 187.05 202.65 171.45 0.08

21 11-Mar 3842.3208 175.30 8.09 186.34 202.51 170.16 0.16

22 12-Mar 3872.53685 175.90 8.26 185.72 202.24 169.19 0.20

23 13-Mar 3925.21483 181.70 8.47 185.09 202.03 168.15 0.40

24 14-Mar 3935.96284 182.00 8.60 184.54 201.74 167.34 0.43

25 18-Mar 3947.73951 183.30 8.16 183.37 199.69 167.04 0.50

26 19-Mar 3976.90071 185.50 7.83 182.40 198.06 166.73 0.60

27 20-Mar 3938.50698 182.80 7.35 181.77 196.47 167.07 0.54

28 24-Mar 3860.12996 178.20 6.91 181.24 195.06 167.41 0.39

29 25-Mar 3818.30024 176.60 6.21 180.67 193.09 168.24 0.34

30 27-Mar 3749.07538 173.90 5.58 180.26 191.41 169.10 0.22

31 28-Mar 3794.29306 176.40 4.85 179.77 189.47 170.06 0.33

32 31-Mar 3722.4099 176.30 4.31 179.21 187.82 170.59 0.33

33 1-Apr 3610.42597 173.30 3.94 178.76 186.64 170.88 0.15

34 2-Apr 3654.74755 174.80 3.79 178.39 185.98 170.81 0.26

35 3-Apr 3673.50875 174.60 3.84 177.99 185.67 170.31 0.28

36 4-Apr 3657.03935 174.90 3.70 177.67 185.08 170.26 0.31

37 7-Apr 3650.67727 175.10 3.72 177.58 185.01 170.15 0.33

38 8-Apr 3665.42193 175.20 3.77 177.21 184.76 169.66 0.37

39 9-Apr 3732.64714 178.50 3.66 177.33 184.65 170.00 0.58

40 10-Apr 3738.70201 176.50 3.68 177.29 184.66 169.93 0.45

41 11-Apr 3720.35661 175.60 3.68 177.29 184.66 169.93 0.38

42 15-Apr 3763.718 177.50 3.69 177.29 184.66 169.92 0.51

43 16-Apr 3698.73459 176.60 3.63 177.36 184.62 170.10 0.45

44 17-Apr 3701.89123 176.10 3.55 177.59 184.70 170.49 0.39

45 18-Apr 3707.48882 177.00 3.52 177.66 184.70 170.61 0.45

46 21-Apr 3666.98597 175.90 3.53 177.64 184.70 170.58 0.38

47 22-Apr 3660.87855 175.30 3.40 177.42 184.22 170.62 0.34

48 23-Apr 3662.4067 175.00 3.23 177.14 183.59 170.69 0.33

49 24-Apr 3660.5968 174.90 2.88 176.76 182.53 170.99 0.34

50 25-Apr 3653.88236 175.00 2.02 176.31 180.36 172.26 0.34

51 26-Apr 3620.89462 170.10 1.33 175.95 178.60 173.29 -0.60

52 29-Apr 3617.35462 168.00 1.30 175.92 178.52 173.31 -1.02

53 30-Apr 3618.48659 168.80 1.20 175.76 178.16 173.35 -0.95

30 | P a g e

Chart #13 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Padma Oil Company Ltd

Chart #14 | Daily Deviation of closing prices; Padma Oil Company Ltd

Here we can see from chart#13 & chart#14- the deviation was gradually decreasing and, hence, the bands’ distance between the lines was gradually decreasing. Before the 26th April, bands squeezed tightly and moved almost parallel, range between them was stable. This was an early caution about potential breakout and exactly it was occurred on 26th April.

0.00

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250.00


Price

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LB

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8.00

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10.00


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31 | P a g e

Chart #15 | Daily %b of Bollinger Bands; Padma Oil Company Ltd

Since, 26th April, the value of %b was below 0.00, so the price breakout the lower band. Again the last value of %b is -0.90 which indicate that the price is below the lower band.


I have taken 34 days price of Padma oil company Ltd and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#8 | Model summery, ANOVA, Coefficients

Table#10 | Model summery, ANOVA, Coefficients; Padma Oil Company Ltd Model summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig


From the table we see that 64.5% of the variation of price of Padma oil company Ltd can be explained by the Index of DSE and the sensitivity of the price of Padma oil company Ltd to Index of DSE is 0.027, that is, if the Index of DSE will be increased by Tk. 1/- then price of Padma oil company Ltd will be increased by Tk. 0.027/-.

‐1.20

‐1.00

‐0.80

‐0.60

‐0.40

‐0.20

0.00

0.20

0.40

0.60

0.80


32 | P a g e

Active Fine Chemicals Ltd

Table#11 | Bollinger Bands (20,2); Active Fine Chemicals Ltd


20 10-Mar 3873.4627 74.7 1.84 77.05 80.72 73.38 0.18

21 11-Mar 3842.3208 72.7 1.78 77.04 80.60 73.48 -0.11

22 12-Mar 3872.53685 72 1.74 77.01 80.48 73.54 -0.22

23 13-Mar 3925.21483 71.6 1.70 76.98 80.37 73.59 -0.29

24 14-Mar 3935.96284 73.1 1.73 76.87 80.32 73.41 -0.05

25 18-Mar 3947.73951 73 1.87 76.79 80.53 73.04 -0.01

26 19-Mar 3976.90071 73.2 2.13 76.61 80.87 72.35 0.10

27 20-Mar 3938.50698 74.6 2.39 76.42 81.19 71.64 0.31

28 24-Mar 3860.12996 73.3 2.48 76.31 81.27 71.34 0.20

29 25-Mar 3818.30024 70.7 2.58 76.20 81.35 71.04 -0.03

30 27-Mar 3749.07538 69.4 2.66 76.07 81.39 70.75 -0.13

31 28-Mar 3794.29306 54 2.63 75.90 81.16 70.63 -1.58

32 31-Mar 3722.4099 54 2.67 75.81 81.15 70.46 -1.54

33 1-Apr 3610.42597 53 2.53 75.45 80.52 70.39 -1.72

34 2-Apr 3654.74755 53.1 2.54 74.98 80.05 69.91 -1.66

35 3-Apr 3673.50875 53.2 2.72 74.53 79.96 69.09 -1.46

36 4-Apr 3657.03935 53.4 5.27 73.32 83.87 62.77 -0.44

37 7-Apr 3650.67727 53.4 6.64 72.01 85.29 58.73 -0.20

38 8-Apr 3665.42193 53.6 7.67 70.65 86.00 55.31 -0.06

39 9-Apr 3732.64714 55 8.36 69.31 86.02 52.59 0.07

40 10-Apr 3738.70201 56.4 8.99 68.18 86.15 50.21 0.17

41 11-Apr 3720.35661 55.3 9.31 66.94 85.57 48.32 0.19

42 15-Apr 3763.718 56.4 9.49 65.73 84.71 46.74 0.25

43 16-Apr 3698.73459 55.3 9.51 64.53 83.54 45.51 0.26

44 17-Apr 3701.89123 54.3 9.41 63.49 82.32 44.66 0.26

45 18-Apr 3707.48882 53.8 9.28 62.63 81.19 44.08 0.26

46 21-Apr 3666.98597 53.3 9.14 61.75 80.03 43.47 0.27

47 22-Apr 3660.87855 53.4 8.90 60.95 78.76 43.14 0.29

48 23-Apr 3662.4067 53.7 8.50 60.02 77.02 43.01 0.31

49 24-Apr 3660.5968 53.4 8.01 59.03 75.06 43.01 0.32

50 25-Apr 3653.88236 53.5 7.35 58.01 72.71 43.31 0.35

51 26-Apr 3620.89462 53.4 6.28 56.89 69.45 44.33 0.36

52 29-Apr 3617.35462 52.5 6.17 56.72 69.05 44.38 0.33

53 30-Apr 3618.48659 52.6 4.88 55.74 65.49 45.98 0.34

33 | P a g e

Chart #16 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Active Fine Chemicals Ltd

Chart #17 | Daily Deviation of closing prices; Active Fine Chemicals Ltd

We see from chart#16 – there was occurred a huge breakout of the lower band on 27th March. Before the 27th March, bands squeezed tightly and moved almost parallel, range between them was stable. This was an early caution about potential breakout and exactly it was occurred on 27th March.

Here we can see from the chart#17- the deviation was rapidly increased after the 2nd April and, hence, the bands’ distance between the lines was rapidly expanded.

0

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20

30

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60

70

80

90

100


Price

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LB

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7.00

8.00

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10.00


Deviation

34 | P a g e

Chart #18 | Daily %b of Bollinger Bands; Active Fine Chemicals Ltd

We see that the value of %b is always near 0.00 and some time it is less than 0.00. So, the price maximum times remains near the lower band and sometimes it breakout the lower band.


I have taken 34 days price of Active Fine Chemicals Ltd and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#12 | Model summery, ANOVA, Coefficients; Active Fine Chemicals Ltd

Table#12 | Model summery, ANOVA, Coefficients; Active Fine Chemicals Ltd Model summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig


From the table we see that 83.4% of the variation of price of Active Fine Chemicals Ltd can be explained by the Index of DSE and the sensitivity of the price of Active Fine Chemicals Ltd to Index of DSE is 0.073, that is, if the Index of DSE will be increased by Tk. 1/- then price of Active Fine Chemicals Ltd will be increased by Tk. 0.073/-.

‐2.00

‐1.50

‐1.00

‐0.50

0.00

0.50


%b

35 | P a g e

Bangladesh Submarine Cable Company Ltd

Table#13 | Bollinger Bands (20,2); Bangladesh Submarine Cable Company Ltd

Date Index of DSE

Price Deviation MB UB LB %b

20 10-Mar 3873.4627 114.30 5.35 130.48 141.17 119.78 -0.26

21 11-Mar 3842.3208 114.60 5.87 129.79 141.53 118.04 -0.15

22 12-Mar 3872.53685 117.30 6.68 128.94 142.31 115.58 0.06

23 13-Mar 3925.21483 124.10 7.45 128.09 142.99 113.19 0.37

24 14-Mar 3935.96284 123.50 7.86 127.40 143.11 111.69 0.38

25 18-Mar 3947.73951 123.30 8.27 126.56 143.09 110.02 0.40

26 19-Mar 3976.90071 126.60 8.33 125.74 142.40 109.07 0.53

27 20-Mar 3938.50698 124.30 8.24 125.38 141.87 108.89 0.47

28 24-Mar 3860.12996 120.50 8.16 125.02 141.33 108.70 0.36

29 25-Mar 3818.30024 119.70 7.97 124.55 140.50 108.60 0.35

30 27-Mar 3749.07538 116.50 7.24 123.91 138.38 109.44 0.24

31 28-Mar 3794.29306 118.30 6.38 123.19 135.95 110.42 0.31

32 31-Mar 3722.4099 118.90 5.79 122.50 134.08 110.92 0.34

33 1-Apr 3610.42597 116.10 5.23 121.84 132.30 111.38 0.23

34 2-Apr 3654.74755 116.80 4.89 121.30 131.08 111.52 0.27

35 3-Apr 3673.50875 117.80 4.78 120.73 130.28 111.17 0.35

36 4-Apr 3657.03935 118.00 4.23 120.09 128.56 111.63 0.38

37 7-Apr 3650.67727 118.80 4.10 119.79 128.00 111.59 0.44

38 8-Apr 3665.42193 119.00 3.83 119.23 126.88 111.58 0.48

39 9-Apr 3732.64714 120.20 3.86 119.08 126.80 111.35 0.57

40 10-Apr 3738.70201 121.60 3.82 118.88 126.53 111.23 0.68

41 11-Apr 3720.35661 120.10 3.83 118.84 126.50 111.18 0.58

42 15-Apr 3763.718 121.30 3.70 119.06 126.45 111.66 0.65

43 16-Apr 3698.73459 119.00 3.38 119.39 126.15 112.63 0.47

44 17-Apr 3701.89123 118.90 3.16 119.70 126.03 113.37 0.44

45 18-Apr 3707.48882 118.40 2.95 120.07 125.97 114.17 0.36

46 21-Apr 3666.98597 117.40 2.88 120.22 125.97 114.46 0.26

47 22-Apr 3660.87855 116.70 2.74 120.07 125.55 114.59 0.19

48 23-Apr 3662.4067 116.80 2.63 119.83 125.09 114.58 0.21

49 24-Apr 3660.5968 115.70 2.50 119.60 124.60 114.60 0.11

50 25-Apr 3653.88236 117.90 1.89 119.17 122.95 115.39 0.33

51 26-Apr 3620.89462 117.60 1.49 118.81 121.78 115.83 0.30

52 29-Apr 3617.35462 119.90 1.52 118.70 121.74 115.66 0.70

53 30-Apr 3618.48659 118.80 1.52 118.52 121.55 115.48 0.55

36 | P a g e

Chart #19 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Bangladesh Submarine Cable Company Ltd

Chart #20 | Daily Deviation of closing prices; Bangladesh Submarine Cable Company Ltd

We know, calm and very harmonic movement of bands and a tight range between them tell us, that volatility extremely stable. This couldn’t hold too long. Tight range between bands tells, in turn, that volatility is low. This combination tells, that market in extremely calm period - it couldn’t hold too long. Extreme calming is unnatural for markets and this could lead only to a single scenario – growth of volatility and breakout.


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40.00

60.00

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120.00

140.00

160.00


Price

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LB

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Deviation

37 | P a g e

Chart #21 | Daily %b of Bollinger Bands; Bangladesh Submarine Cable Company Ltd

Since the probability of breakout is high & the last value of %b is above 0.50 & near 1.00, that means the last price is between the middle & upper line, so I think breakout will be occurred with upper band.


I have taken 34 days price of Bangladesh Submarine Cable Company Ltd. and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#14 | Model summery, ANOVA, Coefficients; Bangladesh Submarine Cable Company Ltd

Table#14 | Model summery, ANOVA, Coefficients; Bangladesh Submarine Cable Company Ltd Model summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig


From the table we see that 34.9% of the variation of price of Bangladesh Submarine Cable Company Ltd. can be explained by the Index of DSE and the sensitivity of the price of Bangladesh Submarine Cable Company Ltd. to Index of DSE is 0.015, that is, if the Index of DSE will be increased by Tk. 1/- then price of Bangladesh Submarine Cable Company Ltd. will be increased by Tk. 0.015/-.

‐0.40

‐0.20

0.00

0.20

0.40

0.60

0.80


%b

38 | P a g e

Islami Bank Bangladesh Ltd

Table#15 | Bollinger Bands (20, 2); Islami Bank Bangladesh Ltd Date Index of

DSE Price Deviation MB UB LB %b

20 10-Mar 3873.4627 40.40 1.69 41.85 45.23 38.47 0.29

21 11-Mar 3842.3208 40.40 1.70 41.74 45.14 38.33 0.30

22 12-Mar 3872.53685 40.70 1.69 41.66 45.03 38.28 0.36

23 13-Mar 3925.21483 41.50 1.68 41.57 44.93 38.22 0.49

24 14-Mar 3935.96284 41.70 1.66 41.52 44.83 38.20 0.53

25 18-Mar 3947.73951 41.70 1.52 41.31 44.35 38.27 0.56

26 19-Mar 3976.90071 42.30 1.40 41.15 43.94 38.35 0.71

27 20-Mar 3938.50698 42.80 1.25 41.03 43.52 38.53 0.86

28 24-Mar 3860.12996 42.80 1.09 40.92 43.10 38.74 0.93

29 25-Mar 3818.30024 43.00 0.91 40.82 42.63 39.01 1.10

30 27-Mar 3749.07538 43.60 0.82 40.78 42.42 39.14 1.36

31 28-Mar 3794.29306 43.30 0.87 40.81 42.54 39.07 1.22

32 31-Mar 3722.4099 43.90 0.87 40.76 42.51 39.02 1.40

33 1-Apr 3610.42597 42.10 0.98 40.84 42.80 38.88 0.82

34 2-Apr 3654.74755 41.40 1.09 40.96 43.14 38.78 0.60

35 3-Apr 3673.50875 41.80 1.22 41.14 43.58 38.69 0.64

36 4-Apr 3657.03935 41.90 1.29 41.31 43.88 38.73 0.62

37 7-Apr 3650.67727 41.90 1.39 41.49 44.27 38.72 0.57

38 8-Apr 3665.42193 42.30 1.36 41.59 44.31 38.86 0.63

39 9-Apr 3732.64714 42.40 1.34 41.64 44.32 38.96 0.64

40 10-Apr 3738.70201 42.70 1.21 41.77 44.19 39.35 0.69

41 11-Apr 3720.35661 42.50 1.13 41.88 44.13 39.63 0.64

42 15-Apr 3763.718 35.70 1.06 41.96 44.09 39.84 -0.97

43 16-Apr 3698.73459 35.90 0.97 42.08 44.02 40.14 -1.09

44 17-Apr 3701.89123 35.50 0.89 42.18 43.96 40.41 -1.38

45 18-Apr 3707.48882 35.30 0.79 42.31 43.88 40.73 -1.73

46 21-Apr 3666.98597 34.70 0.69 42.40 43.78 41.02 -2.29

47 22-Apr 3660.87855 34.40 1.64 42.09 45.38 38.81 -0.67

48 23-Apr 3662.4067 34.10 2.15 41.79 46.09 37.49 -0.39

49 24-Apr 3660.5968 34.00 2.57 41.46 46.60 36.33 -0.23

50 25-Apr 3653.88236 34.70 2.90 41.09 46.90 35.29 -0.05

51 26-Apr 3620.89462 34.20 3.20 40.67 47.07 34.27 -0.01

52 29-Apr 3617.35462 34.90 3.41 40.36 47.17 33.54 0.10

53 30-Apr 3618.48659 35.60 3.61 39.92 47.15 32.69 0.20

39 | P a g e

Chart #22 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Islami Bank Bangladesh Ltd

Chart #23 | Daily Deviation of closing prices; Islami Bank Bangladesh Ltd

We see from chart#22 – there was occurred a huge breakout of the lower band on 12th April. Before the 12th April, bands squeezed tightly and moved almost parallel, range between them was stable. This was an early caution about potential breakout and exactly it was occurred on 12th April.

Here we can see from the chart#23- the deviation was rapidly increased after the 21st April and, hence, the bands’ distance between the lines was rapidly expanded.

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15.00

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25.00

30.00

35.00

40.00

45.00

50.00


Price

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0.00

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1.50

2.00

2.50

3.00

3.50

4.00


Deviation

40 | P a g e

Chart #24 | Daily %b of Bollinger Bands; Islami Bank Bangladesh Ltd

Since, on 13th April, the value of %b was less than 0.00, so the price breakout the lower band, again, it return back between the bands on 26th April. The last value of %b is 0.20 which indicate that the price is near the lower band.

Regression analysis

I have taken 34 days price of Islami Bank Bangladesh Ltd. and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#16 | Model summery, ANOVA, Coefficients; Islami Bank Bangladesh Ltd

Table#16 | Model summery, ANOVA, Coefficients; Islami Bank Bangladesh Ltd Model summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig


From the table we see that 23.7% of the variation of price of Islami Bank Bangladesh Ltd. can be explained by the Index of DSE and the sensitivity of the price of Islami Bank Bangladesh Ltd. to Index of DSE is 0.016, that is, if the Index of DSE will be increased by Tk. 1/- then price of Islami Bank Bangladesh Ltd. will be increased by Tk. 0.016/-.

‐2.50

‐2.00

‐1.50

‐1.00

‐0.50

0.00

0.50

1.00

1.50

2.00


41 | P a g e

Square Pharmaceuticals Ltd

Table#17 | Bollinger Bands (20, 2); Square Pharmaceuticals Ltd


20 10-Mar 3873.4627 174.60 3.45 178.43 185.34 171.53 0.22

21 11-Mar 3842.3208 174.60 3.46 178.21 185.14 171.29 0.24

22 12-Mar 3872.53685 175.70 3.48 178.00 184.95 171.05 0.33

23 13-Mar 3925.21483 175.80 3.45 177.84 184.74 170.93 0.35

24 14-Mar 3935.96284 178.80 3.44 177.68 184.55 170.80 0.58

25 18-Mar 3947.73951 177.80 3.40 177.34 184.13 170.55 0.53

26 19-Mar 3976.90071 177.90 3.18 176.99 183.35 170.63 0.57

27 20-Mar 3938.50698 177.70 2.98 176.69 182.65 170.72 0.59

28 24-Mar 3860.12996 177.20 2.84 176.57 182.25 170.88 0.56

29 25-Mar 3818.30024 178.10 2.52 176.33 181.36 171.30 0.68

30 27-Mar 3749.07538 178.80 2.18 176.12 180.48 171.76 0.81

31 28-Mar 3794.29306 179.50 2.00 175.99 179.98 172.00 0.94

32 31-Mar 3722.4099 178.60 1.80 175.77 179.38 172.17 0.89

33 1-Apr 3610.42597 176.90 1.77 175.74 179.29 172.20 0.66

34 2-Apr 3654.74755 177.10 1.82 175.93 179.58 172.29 0.66

35 3-Apr 3673.50875 177.30 1.92 176.12 179.96 172.27 0.65

36 4-Apr 3657.03935 177.40 2.02 176.18 180.22 172.15 0.65

37 7-Apr 3650.67727 178.10 2.04 176.41 180.48 172.33 0.71

38 8-Apr 3665.42193 178.30 2.03 176.47 180.54 172.41 0.72

39 9-Apr 3732.64714 178.30 1.63 176.78 180.04 173.52 0.73

40 10-Apr 3738.70201 178.00 1.61 176.86 180.09 173.64 0.68

41 11-Apr 3720.35661 178.00 1.53 177.01 180.07 173.94 0.66

42 15-Apr 3763.718 179.10 1.42 177.20 180.04 174.36 0.83

43 16-Apr 3698.73459 177.50 1.33 177.38 180.04 174.72 0.52

44 17-Apr 3701.89123 176.80 1.17 177.57 179.91 175.24 0.33

45 18-Apr 3707.48882 178.50 0.94 177.75 179.63 175.88 0.70

46 21-Apr 3666.98597 178.00 0.80 177.87 179.48 176.27 0.54

47 22-Apr 3660.87855 178.80 0.68 178.05 179.42 176.68 0.77

48 23-Apr 3662.4067 178.80 0.67 177.98 179.32 176.64 0.81

49 24-Apr 3660.5968 179.50 0.72 177.93 179.37 176.49 1.05

50 25-Apr 3653.88236 179.70 0.73 177.96 179.42 176.49 1.10

51 26-Apr 3620.89462 178.50 0.73 177.97 179.43 176.52 0.68

52 29-Apr 3617.35462 178.80 0.73 178.02 179.48 176.55 0.77

53 30-Apr 3618.48659 179.50 0.73 178.10 179.55 176.64 0.98

42 | P a g e

Chart #25 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Square Pharmaceuticals Ltd

Chart #26 | Daily Deviation of closing prices; Square Pharmaceuticals Ltd

Here we can see from chart#25 & chart#26- the deviation was gradually decreasing and, hence, the bands’ distance between the lines was gradually decreasing. This combination tells that market is in extremely calm period - it couldn’t hold too long. Extreme calming is unnatural for markets and this could lead only to a single scenario – growth of volatility and breakout.

Since the price touches the upper band, so the breakout may occur with the upper band.

168.00

170.00

172.00

174.00

176.00

178.00

180.00

182.00

184.00

186.00

188.00


Price

MB

UB

LB

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00


Deviation

43 | P a g e

Chart #27 | Daily %b of Bollinger Bands; Square Pharmaceuticals Ltd

We see that the value of %b was more than 1.00 on 24th April, so there is one breakout of upper band which was occurred on that day. The last value of %b is 0.98 which indicate that the price is near the upper band.


I have taken 34 days price of Square Pharmaceutical Ltd. and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#18 | Model summery, ANOVA, Coefficients; Square Pharmaceuticals Ltd

Table#18 | Model summery, ANOVA, Coefficients; Square Pharmaceuticals Ltd Model summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig


From the table we see that 15.5% of the variation of price of Square Pharmaceutical Ltd. can be explained by the Index of DSE and the sensitivity of the price of Square Pharmaceutical Ltd. to Index of DSE is -0.004, that is, if the Index of DSE will be increased by Tk. 1/- then price of Square Pharmaceutical Ltd. will be increased by Tk. -0.004/-.

0.00

0.20

0.40

0.60

0.80

1.00

1.20


%b

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Titas Gas Transmission & Dist. Co. Ltd

Table#19 | Bollinger Bands (20,2); Titas Gas Transmission & Dist. Co. Ltd


20 10-Mar 3873.4627 66.00 2.40 69.69 74.50 64.89 0.12

21 11-Mar 3842.3208 66.10 2.47 69.49 74.43 64.54 0.16

22 12-Mar 3872.53685 66.80 2.52 69.31 74.34 64.27 0.25

23 13-Mar 3925.21483 67.70 2.55 69.14 74.24 64.03 0.36

24 14-Mar 3935.96284 69.70 2.58 68.98 74.14 63.82 0.57

25 18-Mar 3947.73951 70.80 2.53 68.67 73.72 63.61 0.71

26 19-Mar 3976.90071 70.00 2.46 68.43 73.35 63.50 0.66

27 20-Mar 3938.50698 68.40 2.40 68.26 73.05 63.47 0.51

28 24-Mar 3860.12996 66.70 2.28 68.16 72.72 63.59 0.34

29 25-Mar 3818.30024 66.30 2.11 68.06 72.28 63.83 0.29

30 27-Mar 3749.07538 66.10 2.02 67.98 72.01 63.95 0.27

31 28-Mar 3794.29306 67.30 1.84 67.82 71.50 64.14 0.43

32 31-Mar 3722.4099 67.40 1.70 67.64 71.04 64.23 0.47

33 1-Apr 3610.42597 66.30 1.55 67.43 70.53 64.33 0.32

34 2-Apr 3654.74755 67.10 1.50 67.27 70.28 64.26 0.47

35 3-Apr 3673.50875 67.50 1.53 67.22 70.27 64.17 0.55

36 4-Apr 3657.03935 67.70 1.51 67.18 70.21 64.16 0.59

37 7-Apr 3650.67727 67.90 1.52 67.19 70.22 64.16 0.62

38 8-Apr 3665.42193 67.90 1.53 67.13 70.19 64.08 0.63

39 9-Apr 3732.64714 70.10 1.42 67.26 70.09 64.43 1.00

40 10-Apr 3738.70201 69.90 1.41 67.30 70.12 64.48 0.96

41 11-Apr 3720.35661 68.70 1.39 67.38 70.16 64.60 0.74

42 15-Apr 3763.718 70.00 1.36 67.47 70.20 64.74 0.96

43 16-Apr 3698.73459 68.00 1.33 67.56 70.22 64.91 0.58

44 17-Apr 3701.89123 69.90 1.39 67.78 70.56 65.00 0.88

45 18-Apr 3707.48882 72.00 1.41 67.98 70.79 65.17 1.22

46 21-Apr 3666.98597 71.00 1.39 68.08 70.85 65.31 1.03

47 22-Apr 3660.87855 70.80 1.45 68.20 71.09 65.31 0.95

48 23-Apr 3662.4067 71.00 1.40 68.11 70.92 65.31 1.02

49 24-Apr 3660.5968 70.70 1.32 68.06 70.71 65.42 1.00

50 25-Apr 3653.88236 70.40 1.54 68.17 71.24 65.10 0.86

51 26-Apr 3620.89462 70.20 1.66 68.31 71.63 64.98 0.79

52 29-Apr 3617.35462 70.00 1.71 68.43 71.85 65.01 0.73

53 30-Apr 3618.48659 70.30 1.75 68.65 72.14 65.15 0.74

45 | P a g e

Chart #28 | Closing Price Daily, 20-period/2-deviations Bollinger Bands; Titas Gas Transmission & Dist. Co. Ltd

Chart #29 | Daily Deviation of closing prices; Titas Gas Transmission & Dist. Co. Ltd

Here we see from chart#28 & chart#29- the deviation was gradually decreasing and, hence, the bands’ distance between the lines was gradually decreasing & market became in extremely calm period and this could lead only to a single scenario – growth of volatility and breakout and that was occurred on 18th April.

Since deviation is increasing so breakout may occur again with the upper band.

62.00

64.00

66.00

68.00

70.00

72.00

74.00

76.00


Price

MB

UB

LB

0.00

0.50

1.00

1.50

2.00

2.50

3.00


Deviation

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Chart #30 | Daily %b of Bollinger Bands; Titas Gas Transmission & Dist. Co. Ltd

We see that the value of %b was more than 1.00 on 18th April, so there is one breakout of upper band which was occurred on that day. The last value of %b is 0.74 which indicate that the price is near the upper band.

Regression analysis

I have taken 34 days price of Titas Gas Transmission & Dist. Co. Ltd. and Index of DSE to find the relationship between them. Then I have run regression by SPSS taking price as dependent variable and Index as independent variable. The result summery of regression is shown below by Table#18 | Model summery, ANOVA, Coefficients; Titas Gas Transmission & Dist. Co. Ltd

Table#20 | Model summery, ANOVA, Coefficients; Titas Gas Transmission & Dist. Co. LtdModel summery ANOVA Coefficients Table R R Square F sig Model Coefficients St. error t. stat sig


From the table we see that 4.6% of the variation of price of Titas Gas Transmission & Dist. Co. Ltd. can be explained by the Index of DSE and the sensitivity of the price of Titas Gas Transmission & Dist. Co. Ltd. to Index of DSE is -0.003, that is, if the Index of DSE will be increased by Tk. 1/- then price of Titas Gas Transmission & Dist. Co. Ltd. will be increased by Tk. -0.003/-.

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40


%b

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Table#21 | Bollinger Bands (20,2); Dhaka Stock Exchange (DSE)

Date Index of DSE Deviation MB UB LB %b

20 10-Mar 3873.4627 163.76 4210.49 4538.01 3882.96 -0.01

21 11-Mar 3842.3208 169.19 4195.94 4534.32 3857.57 -0.02

22 12-Mar 3872.53685 174.76 4181.58 4531.10 3832.07 0.06

23 13-Mar 3925.21483 180.27 4167.51 4528.05 3806.98 0.16

24 14-Mar 3935.96284 187.03 4152.81 4526.86 3778.76 0.21

25 18-Mar 3947.73951 192.98 4127.49 4513.45 3741.54 0.27

26 19-Mar 3976.90071 193.23 4103.41 4489.87 3716.94 0.34

27 20-Mar 3938.50698 189.47 4083.07 4462.01 3704.13 0.31

28 24-Mar 3860.12996 181.63 4062.36 4425.63 3699.10 0.22

29 25-Mar 3818.30024 165.98 4039.91 4371.87 3707.95 0.17

30 27-Mar 3749.07538 147.53 4020.04 4315.10 3724.99 0.04

31 28-Mar 3794.29306 126.48 3999.14 4252.09 3746.19 0.10

32 31-Mar 3722.4099 108.56 3983.24 4200.37 3766.12 -0.10

33 1-Apr 3610.42597 90.99 3962.49 4144.46 3780.51 -0.47

34 2-Apr 3654.74755 85.59 3945.29 4116.47 3774.12 -0.35

35 3-Apr 3673.50875 88.72 3927.18 4104.61 3749.74 -0.21

36 4-Apr 3657.03935 76.84 3908.60 4062.28 3754.91 -0.32

37 7-Apr 3650.67727 81.32 3892.13 4054.78 3729.48 -0.24

38 8-Apr 3665.42193 94.85 3869.14 4058.84 3679.45 -0.04

39 9-Apr 3732.64714 106.25 3858.92 4071.42 3646.42 0.20

40 10-Apr 3738.70201 109.68 3842.66 4062.02 3623.29 0.26

41 11-Apr 3720.35661 113.22 3826.54 4052.98 3600.10 0.27

42 15-Apr 3763.718 116.49 3811.45 4044.43 3578.46 0.40

43 16-Apr 3698.73459 118.18 3798.35 4034.70 3562.00 0.29

44 17-Apr 3701.89123 117.65 3790.94 4026.24 3555.64 0.31

45 18-Apr 3707.48882 117.54 3785.49 4020.57 3550.40 0.33

46 21-Apr 3666.98597 116.52 3777.48 4010.51 3544.44 0.26

47 22-Apr 3660.87855 111.20 3768.98 3991.37 3546.58 0.26

48 23-Apr 3662.4067 104.89 3756.49 3966.27 3546.72 0.28

49 24-Apr 3660.5968 95.21 3743.55 3933.98 3553.12 0.28

50 25-Apr 3653.88236 77.89 3729.37 3885.16 3573.59 0.26

51 26-Apr 3620.89462 61.37 3715.08 3837.82 3592.35 0.12

52 29-Apr 3617.35462 60.97 3712.37 3834.31 3590.43 0.11

53 30-Apr 3618.48659 51.50 3702.49 3805.49 3599.48 0.09

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Chart #31 | Index of DSE, Daily, 20-period/2-deviations Bollinger Bands; Dhaka Stock Exchange (DSE)

Chart #32 | Daily Deviation of Index of DSE; Dhaka Stock Exchange (DSE)

We know, calm and very harmonic movement of bands and a tight range between them tell us, that volatility extremely stable. This couldn’t hold too long. Tight range between bands tells, in turn, that volatility is low. This combination tells, that market in extremely calm period - it couldn’t hold too long. Extreme calming is unnatural for markets and this could lead only to a single scenario – growth of volatility and breakout.


0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000


Index of DSE

MB

UB

LB

0.00

50.00

100.00

150.00

200.00

250.00


Deviation

49 | P a g e

Chart #33 | Daily %b of Bollinger Bands; Dhaka Stock Exchange (DSE)

Since the probability of breakout is high & the last value of %b is 0.09, that means- the last Index of DSE is exactly near the lower band, so I think breakout will be occurred with lower band.

‐0.60

‐0.50

‐0.40

‐0.30

‐0.20

‐0.10

0.00

0.10

0.20

0.30

0.40

0.50

7‐Mar 17‐Mar 27‐Mar 6‐Apr 16‐Apr 26‐Apr 6‐May%b

50 | P a g e

Chapter 5

Findings & Conclusions Findings:

LankaBangla Finance Ltd.

Bollinger Bands: breakout with lower band has occurred and it may continue. Regression analysis: price depends 75.6% on Index of DSE and the sensitivity of the price to

Index of DSE is 0.025.

Meghna Petroleum Ltd.

Bollinger Bands: Bollinger bounce has occurred. So, less probability of breakout has been created.

Regression analysis: price depends 32.6% on Index of DSE and the sensitivity of the price to Index of DSE is 0.011.

United Airways (BD) Ltd.

Bollinger Bands: Bollinger squeeze & bounce has occurred. Bollinger squeeze increases the probability of breakout; on the other hand Bollinger bounce decreases the probability of breakout. So it’s so complex.


Jamuna Oil Company Ltd.

Bollinger Bands: Bollinger squeeze has occurred. So, strong probability of breakout has been created.

Regression analysis: price depends 0.1% on Index of DSE and the sensitivity of the price to Index of DSE is -0.001.

Padma Oil Company Ltd.

Bollinger Bands: Bollinger squeeze has observed; breakout with lower band has occurred and it may continue.


51 | P a g e

Active Fine Chemicals Ltd

Bollinger Bands: it shows downward trend & its deviation is high so it is risky. Regression analysis: price depends 83.4% on Index of DSE and the sensitivity of the price to

Index of DSE is 0.073.

Bangladesh Submarine Cable Company Ltd.

Bollinger Bands: Bollinger squeeze has occurred. So, strong probability of breakout has been created.


Islami Bank Bangladesh Ltd.

Bollinger Bands: huge breakout with lower band has occurred. Since deviation is increasing so breakout may occur again with the lower band.


Square Pharmaceutical Ltd.

Bollinger Bands: Bollinger squeeze has occurred & the price line is near upper band. So, strong probability of breakout with upper band has been created.


Titas Gas Transmission & Dist. Co. Ltd.

Bollinger Bands: breakout with upper band has occurred. Since deviation is increasing so breakout may occur again with the upper band.



Bollinger Bands: It shows downward trend, & breakout with lower band. Bollinger squeeze has observed; so breakout with lower band may occur and it may continue.

Conclusions:

Based on this study I see that most of the companies are risky to invest or trade now. Again Dhaka Stock exchange is also risky market to invest or trade now. Traders or investors should wait for extreme downfall of index of DSE. After that they should trade or invest.

At last I expect this study will be a conducive for any new or old trader or investor to analyze their markets.

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Chapter 6

References Websites:

Dhaka Stock Exchange (DSE) - www.dsebd.org www.wikipedia.org www.investopedia.com www.stockcharts.com www.traders.com www.stockta.com www.bollingerbands.com www.incrediblecharts.com www.onlinetradingconcepts.com www.istockanalyst.com

Books:

Security Analysis & Portfolio Management - Fishers & Jordon. Investment analysis and portfolio Management, Chandra, McGraw Hill2009. Security Analysis & Portfolio Management- V.A.Avadhani.

the practical implication of technical analysis with bollinger bands on empirical study on dhaka...

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