Using the Ichimoku Cloud

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3 Νοε 2013 (πριν από 3 χρόνια και 11 μήνες)

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Using the Ichimoku Cloud

The Ichimoku Kinko Hyo Chart,


A multi
-
faceted indicator designed to give support/resistance levels, trend
direction, and entry/exit points of varying strengths. General theory behind this
indicator states that if price action is a
bove the cloud, the overall trend is
bullish, and if below the cloud, the overall trend is bearish. There are also
moving averages (the Tenkan and Kijun lines) which act like the MACD
crossover signals with the Tenkan crossing from underneath the Kijun as
a
bullish signal, while crossing overhead giving a bearish signal.




Use

Commonly used in Japanese trading rooms, Ichimoku is often applied to establish
the
trend for a pair and detect trend breakouts. It is decent during range bound markets and
like most indicators performance often improves when used over longer time frames.

History

The Ichimoku Cloud was originally called the 'Ichimoku Kinko Hyo.' Wher
e Ichimoku
means 'one glance,'Kinko 'balance' and Hyo 'chart.' Thus the full translation could best be
described as 'one glance balanced chart.' Originally developed by Goichi Hosada pre
WWII, a newspaper journalist (published in 1969) who wanted to develo
p an
Uber
-
indicator that could provide the trader with various levels of support/resistance,
entry/exit points, direction of the trend, and strength of the signal.

Kumo, the Ichimoku Cloud

It later became known as the 'Ichimoku Cloud' since the most chara
cteristic feature of the
indicator is the cloud (Kumo), which is designed to represent various levels of support and
resistance. In developing the cloud, Hosada realized support/resistance levels were not
single lines drawn in the sand, since traders were
often placing their trades at various
distances from the support levels. Thus, since support was many layers deep from the
offers/bids around the level, he created a cloud to represent the past levels of
support/resistance. The cloud is composed of the two

Senkou Span lines (A&B or 1&2)
which are pushed forward in time, and when the area between them is shaded in, it makes
a cloud
-
like shape. The most basic theory of this indicator is that if the price is above the
cloud, the overall trend is bullish while
below the cloud is bearish, and in the cloud is
non
-
biased or unclear. Lastly, when the price is above the cloud, then the top of the cloud
will act as a general support level, and when price is below, the cloud base will act as
resistance. But remember th
e cloud has thickness, and thus resistance does as well,
which by making these thicker reduces the risk of a false breakout.



Tenkan & Kijun Lines

The indicator g
oes much further than this, with using two moving average lines; the
Tenkan Line and the Kijun Line, which are 9 and 26 day moving averages (exponential).
The Tenkan Line is really the conversion line which is when crosses the Kijun line from
underneath, i
s indicative of a bullish signal. When it crosses over the Kijun line from above
pointing downward, it becomes indicative of a bearish signal.



Chikou S
pan

There is also one last line called the Chikou Span, which is representative of today's price
moved back 26 periods ago. This is where the strength of the signal comes in. If you have
a bearish signal (downward crossover of the Tenkan over the Kijun) an
d the Chikou Span
is below the base, then the signal strength increases. If you have a bullish crossover
(Tenkan crosses the Kijun from underneath) and the Chikou Span is above the cloud top,
then the signal strength increases.




There is one last metric for the strength of the signal and confirmation for your buy/sell
signal. If the crossover of the two lines (Tenkan & Kijun) occurs above the cloud, then the
bull
ish signal strength increases and is further confirmation. If the crossover occurs below
the cloud, then the bearish signal intensifies and is further confirmation. Medium buy/sell
signals occur when the crossover takes place in the cloud, and weak occurs
when the
bullish crossover is below the cloud, while a weak bearish signal occurs above the cloud.

Signal Types



Strong Bullish Signal



Medium Bullis
h Signal



Weak Bullish Signal



Clearly there ar
e many different combinations of signals from Ichimoku, and each variable
affects the strength of the signal. The numerous combinations will leave some discretion
to the seasoned trader.

Formulas





Tenkan Line; (highest high + lowest low)/2 calculated o
ver last 9 periods.





Kijun Line; (highest high + lowest low)/2 calculated over last 26 periods.





Chikou Span; (most current closing price plotted 26 time periods back.





Senkou Span A; (Tenkan line + Kijun Line)/2 plotted 26 time periods ahead





Senkou Span B; (highest high + lowest low)/2 calculated over past 52 time periods,
sent 26 periods ahead.



iShares Silver Trust (NYSE:SLV) : Cons
olidation after
run up?

Dec 9, ’10 9:09 PM


SLV has run up very fast over the last 3 months since
it breaks the $20
resistance.

We can see that the leading kumo is flattening; suggesting consolidation.
It is possible that it is going into a consolidation before breaking $30.

Support is around 26.50 from the Kijun sen

Comments (0)

iShares Barclays 20year Treasury Bonds (NYSE:TLT) :
Weekly kumo support

Dec 9, ’10 9:04 PM


TLT has break its previous low support level on the Ichimoku Daily Chart.

Currently, resistance is around 93.78

On the Ichimoku Weekly Chart, we can see that it is fast approaching the
support level around 92.50

A

convincing break below this level will give us a next target of 85


Comments (0)

Straits Times Index (STI) : Possible change in trend

Dec 4, ’10 5:57 PM


A member (trendlines) in the InvestIdeas highlighted about the
possibility of a head
-
and
-
shoulder forming on STI.

From the Ichimoku chart for Straits Times Inde
x (STI), this is confirm
by the sighting of the kumo twist; a possible change in trend on the chart.

Given the fairly thick kumo support below, we will need STI to break the
kumo support before we can confirm that the uptrend has ended.