Ichimoku Charting and Analysis
■ (^) The Chikou Span is retroactively above the cloud, price, and both the
Tenkan‐sen and Kijun‐sen, as seen at Time line 1.
■ (^) The cloud is ascending at a bullish angle.
■ (^) The cloud is relatively thick below current price, indicating potentially strong
resistance at the cloud.
From Figure 16.20, the bearish indications are:
■ (^) Price is below Tenkan‐sen.
■ (^) Price is approaching a relatively thin area of the cloud, which may potentially
see price breaching any support provided by the cloud.
Ichimoku Cloud‐based trade triggers
Employing the use of Ichimoku overlays as a means of initiating or managing
trades is gaining popularity, in addition to being a very effective method of analyz-
ing market behavior. The overlays may be used to:
■ (^) Initiate full or partial entries or exits
■ (^) Position and size stoplosses
Initiating simple entries is predominantly executed at the cloud boundaries.
Here are the various options available for initiating an entry at the cloud:
- When price tests the upper or lower cloud boundary, the trader may initiate
an entry against that boundary, in the form of a reversal entry. A reversal en-
try simply means to go long at support and go short at resistance, as opposed
to a breakout entry, which means to go long if price breaches resistance and
to go short if it breaches support. If price tests the Senkou A cloud boundary
from above, the stoploss is positioned within the cloud, just below the Senkou
A cloud boundary If the cloud is not too thick at the point of entry, the trader
FIgure 16.20 Indentifying Bullish and Bearish Signals on the Daily Financial Select
Sector SPDR.
Courtesy of Stockcharts.com