Ichimoku Charting and Analysis
Figure 16.12 shows Natural Gas descending at a bearish angle, with all five
Ichimoku overlay indicators signaling that a strong downtrend is in effect.barriers to price and Overlay action
All technical overlay indicators represent barriers to price. The reason that they
are barriers to price is simply because they represent support or resistance, and
as such, market participants will normally place long orders above a support
and short or sell orders below a resistance. Consequently, as price approaches
support from above, it will encounter a proportionally larger degree of inter-
est from market participants to go long and as a consequence vie for a better
fill, which may cause price to initially rebound. Similarly, as price approaches
resistance from below, it will encounter a proportionally larger degree of in-
terest from market participants to go short or sell, which may cause price to
initially correct. It is the actual placement of orders and competition for a more
advantageous fill that causes both support and resistance to act as barriers to
price action.
Price may find support or resistance at the:■ (^) Tenkan‐sen
■ (^) Kijun‐sen
■ (^) Upper and lower cloud boundaries
Not only can price find support or resistance at any of the four Ichimoku
moving averages, but all five Ichimoku overlays can also find support or resistance
with each other. For example:
■ (^) Tanken‐sen may find support or resistance at the Kijun‐sen.
■ (^) Both the Tanken‐sen and Kijun‐sen may find support or resistance at the cloud.
■ (^) Chikou Span may find support or resistance retroactively at the cloud, price,
Tenkan‐sen, and Kijun‐sen.
FIgure 16.12 Downtrend Signaled on Daily Natural Gas Chart.
Courtesy of Stockcharts.com