StockSignal
Volatility Compression
Story type: Situational
Three volatility signals have converged: volatility contraction is present, a Bollinger squeeze is detected, and the choppiness index indicates range-bound movement. Together these describe price action that has narrowed into a compressed state.
State
Volatility compression state
Emergence
Multiple volatility compression indicators. When volatility is contracting, a Bollinger squeeze is present, and the choppiness index indicates range-bound behavior, price action is compressed from multiple measurement perspectives. This describes a market structure where price movement has narrowed.
Limits
This story identifies volatility compression characteristics, not directional prediction or timing information. It does not predict breakout direction, guarantee expansion will follow, or indicate when compression will resolve. Compressed states can persist indefinitely.
Explanation
Each signal represents an independent observation about volatility state: Volatility Contraction measures the compression of price movement relative to recent history. Contraction indicates price is moving in a narrower range than recently observed. Bollinger Squeeze detects when Bollinger Bands narrow inside Keltner Channels. This classic pattern indicates volatility has compressed to unusually low levels. Choppiness Index measures whether price is trending or range-bound. Low readings combined with other compression signals reinforce the narrow-range state. When all three align, they describe volatility compression from multiple measurement frameworks—a structural observation about current price behavior.
Interpretation
This story identifies compression characteristics, not future direction. It does not predict breakout direction, guarantee expansion, or indicate timing. Compression can resolve in either direction or persist for extended periods.
Required Signals
volatility-contraction
Recent average true range compared to historical baseline
bollinger-squeeze
Contraction of Bollinger Band width relative to historical norms
choppiness-index
Ratio of cumulative true range to net price displacement