The Projection Bands are made up of two bands showing the minimum and maximum projected boundaries. They're drawn by finding the minimum and maximum prices over a specified period and projecting these forward, parallel to a linear regression line. The resulting plot consists of two bands representing the minimum and maximum price boundaries.
Unlike Bollinger Bands, prices will always be contained by the two bands. The upper band represents a bullish view on the issue and the lower band a bearish one. When the price of an issue nears the upper limit, expect a price correction. If the price is nearing the lower limit, expect prices to move upwards.
It is recommended that all band generated signals be confirmed by other indicators, because prices will often ride along a band for an extended amount of time during strong trending markets. During trending markets, you can use bands to trade short-term reactions against the primary trend. In trading range markets, you can use the bands to trade overbought/oversold levels. Indicators like the VHF, CMO, and R-Squared can be used to determine the trendiness of the market.
The Projection Bands indicator was developed by Mel Widner(Ph.D) and is first published in the July,1995 issue of the "Technical Analysis of Stocks & Commodities” magazine.
Calculation:
HighSlope =LRSlopePeriod(High)
LowSlope =LRSlopePeriod(Low)
Inputs:
Period = 14
Indicates time period(the number of days for daily analysis, the number of weeks for weekly analysis, etc.).
Indicator Type: Support and Resistance