Technical Analysis: Ichimoku Cloud by NSFX
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The document provides an overview of the Ichimoku Cloud technical analysis indicator, including: 1. The basic components of the Ichimoku Cloud are described as the Tenkan-Sen, Kijun-Sen, Senkou Span A, Senkou Span B, and Chinkou Span lines. 2. Buy and sell signals are given by crossovers of the Tenkan-Sen and Kijun-Sen lines, whether the closing price is above or below the cloud, the position of the Chinkou Span line, and the composition of Senkou Span A and B. 3. Examples of how to interpret the Ichimoku Cloud signals on
Technical Analysis: Ichimoku Cloud by NSFX
- 1. Technical Analysis - Ichimoku Cloud 1
- 2. Agenda • Background • The basic setup and calculations • Buy and Sell signals 2
- 3. Background • Introduced in 1969 by Goichi Hosada. • Ichimoku Kinko Hyo meaning “equilibrium at a glance” • Commonly applied in Asia and should be respected when doing analyses on Asian instruments • Based on a philosophy examining simple things in nature from a mountain top and how they act in their respective environment 3
- 4. In the MT4: a) Tenkan-Sen b) Kijun-Sen c) Senkou Span A d) Senkou Span B e) Chinkou Span 4
- 5. Decomposition 1. Tenkan-sen is the average value of the price for the first time interval (nine days), meaning: 𝑇𝑒𝑛𝑘𝑎𝑛 𝑆𝑒𝑛 = 𝐻𝑖𝑔ℎ𝑒𝑠𝑡 ℎ𝑖𝑔ℎ(9) + 𝐿𝑜𝑤𝑒𝑠𝑡 𝑙𝑜𝑤(9) 2 2. Kijun-sen is the average value of the price for the second time interval, 26 days. 𝐾𝑖𝑗𝑢𝑛 − 𝑆𝑒𝑛 = 𝐻𝑖𝑔ℎ𝑒𝑠𝑡 ℎ𝑖𝑔ℎ(26)+𝐿𝑜𝑤𝑒𝑠𝑡 𝑙𝑜𝑤(26) 2 3. Senkou Span A is the middle of interval between two above mentioned lines (Tenkan-sen and Kijun-sen) projected 26 days in the future; 𝑆𝑒𝑛𝑘𝑜𝑢 𝑆𝑝𝑎𝑛 𝐴 = 𝑇𝑒𝑛𝑘𝑎𝑛 𝑆𝑒𝑛 −𝐾𝑖𝑗𝑢𝑛 𝑆𝑒𝑛 2 4. Senkou Span B is the average value of the price for the past 52 days projected 26 days into the future; 𝑆𝑒𝑛𝑘𝑜𝑢 𝑆𝑝𝑎𝑛 𝐵 = 𝐻𝑖𝑔ℎ𝑒𝑠𝑡 𝐻𝑖𝑔ℎ 52 − 𝐿𝑜𝑤𝑒𝑠𝑡 𝐿𝑜𝑤 (52) 2 5. Chinkou Span is the current closing price projected 26 days back 5
- 6. Interpretation 1. Tenkan-sen – also known as the Conversion Line – is interpreted as a simple moving average. 2. Kijun-sen – also known as the Base Line – similar to the Tenkan-sen, but on a longer time-frame. 3. Senkou Span A& B: The ingredients of the cloud. Area in between is shaded illustrating the cloud. Composition gives an idea of future trend. 4. Chinkou Span is the current closing price projected 26 days back and is used for comparison on the chart and defines potential trends. 6
- 7. Signals When studying the Ichimoku Chart, it is important to notice the following: 1. Cross of Tenkan-Sen and Kijun-Sen 2. Closing price against the Cloud 3. Position of Chinkou Span 4. Senkou Span A & B Composition/Cross The more signals in sync, the stronger the signal. As always in Technical Analysis, we are looking for CONFIRMATION. 7
- 8. Signals Signal 1: Cross of Tenkan-Sen (red) and Kijun-Sen (blue) Bullish: Red line closes above blue. Bearish: Red line closes below blue. 8
- 9. Signals Signal 2: Closing price relative to Cloud… Interpretation Price Action Bullish Price above Cloud with bullish momentum Bullish Tendency In the Cloud, but past 2-3 days bullish Bearish Price below Cloud with bearish momentum Bearish Tendency In the Cloud, but past 2-3 days bearish Bullish Bullish Tendency Bearish Tendency Bearish 9
- 10. Signals Signal 3: Position of Kinjun-Sen (Green line) Bullish: Kinjun-Sen crosses above the closing price Bearish: Kinjun-Sen crosses below the closing price Remember that the Kinjun- Sen is lagging 26 days and is also known as the “lagging mountain” Bullish Bearish 10
- 11. Signals Signal 4: Senkou A & B relationship A is above B is a sign of a rising market. A is below B is a sign of a declining market. Rising Market Declining Market 11
- 12. Example 1 12
- 13. Example 2 13
- 14. Example 3 14
- 15. Indicator Example 1 CAD/JPY Daily Example 2 AUD/JPY Daily Example 3 EUR/JPY Daily Tenkan-Sen vs. Kijun-Sen Bullish Bearish Bullish Closing vs. Cloud Indecisive Bearish Bullish Cloud Composition Declining Market Declining Market Declining Market Chinkou-Span Positive Negative Positive 15