Ichimoku Indices Indicator
Ichimoku is a Japanese charting technique that was developed before by a Japanese newspaper writer, with the pen name of Ichimoku Sanjin.
- Ichimoku means "a glance" or "one look"
- Kinko means "equilibrium" or "balance"
- Hyo is the Japanese word for "chart"
Thus, Ichimoku means, "a glance at an equilibrium chart". Ichimoku attempts to identify the likely direction of stock indexes price and help the indices trader to determine the most suitable time to enter or exit the stock indexes trading market.
This indicator consists of five lines drawn using the midpoints of previous highs and lows. The five lines are calculated as follows:
1) Tenkan-Sen; Conversion Line; Red Line (Highest High + Lowest Low) / 2, for the last 9 stock indexes price periods
2) Kijun-Sen; Base Line; Blue Line (Highest High + Lowest Low) / 2, for the last 26 stock indexes price periods
3) Chikou Span; Lagging Span; Green Line Today's closing stock indexes price drawn 26 stock indexes price periods behind
4) Senkou Span A; Leading Span A = (Tenkan-Sen + Kijun-Sen) / 2, drawn 26 stock indexes price periods ahead
5) Senkou Span B; Leading Span B; (Highest High + Lowest Low) / 2, for the past 52 stock indexes price periods, drawn 26 stock indexes price periods ahead
Kumo; Cloud; area between Senkou Span A and B
Indices Technical Analysis and Generating Indices Trading Signals
Bullish signal- Tenkan-Sen crosses the Kijun-Sen from below.
Bearish signal- Tenkan-Sen crosses the Kijun-Sen from above.
However, there are different levels of strength for the buy and sell stock indices signals generated.
Bullish crossover signal occurs above the Kumo (clouds),
Very strong buy indices signal.
Bearish crossover signal occurs below the Kumo (clouds),
Very strong sell indices signal.
If a bullish/ bearish crossover signal takes place within the Kumo (clouds) it is considered a medium strength buy or sell indices signal.
A bullish crossover that occurs below the clouds is considered a weak buy stock indices signal while a bearish crossover that occurs above the clouds is considered a weak sell indices signal.
Support and Resistance Levels
Support and resistance levels can be predicted by the presence of Kumo (clouds). The Kumo can also be used to identify the current indices trend of the stock indexes trading market.
- If stock indexes price is above the Kumo, the prevailing market indices trend is said to be upwards.
- If stock indexes price is below the Kumo, the prevailing market indices trend is said to be downwards.
The Chikou Span or Lagging Span is also used to determine the strength of the buy or sell indices signal.
- If the Chikou Span is below the closing stock indexes price of the last 26 periods ago and a sell short signal is given, then the strength of the indices trend is downwards, otherwise the signal is considered to be a weak sell indices signal.
- If there is a bullish signal and the Chikou Span is above the stock indexes price of the last 26 periods ago, then the strength of the indices trend is to the upside, otherwise it is considered to be a weak buy indices signal.