What is “Berma Jaws”?
It is a new idea developed using "standard deviation channels".
The main purpose of the “Berma Jaw” tool is to find overbought and oversold areas on the chart.
How to Draw the “Berma Jaw”?
The tool consists of two standard deviation channels with the same period and the same formatting properties, such as color and line thickness.
The difference between the two channels is that the first channel uses a standard deviation multiple of one, while the second channel uses a standard deviation multiple of two.
After we add the two channels together on the chart, we shade the space between the borders of both channels from above and from below. The channel will eventually appear as two bars surrounding the prices from above and from below.
How to Use “Berma Jaw”?
The channel is used to determine the direction of price movement, and the extent of overselling or overbuying.
When the channel slopes upward, this is evidence that the direction of price movement is upward.
When the channel slopes downward, this is evidence that the direction of price movement is downward.
When the price candles reach the “Upper Berma Jaw", this is evidence of strong price activity to the upside, and the prices have reached the overbought area. Therefore, there is a high probability that the prices will bounce back down again.
Conversely, when prices reach the “Lower Berma Jaw”, this is evidence of strong price activity in the downward direction and the prices have reached the oversold zone. Therefore, there is a high probability that prices will correct their position upwards again.
At the End.
We have basically learned about the "Berma Jaw" tool. Now, let's move on to the next topic.
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