Ichimoku Charting and Analysis
16.2 Functional Aspect of Ichimoku Overlays
As with all technical overlays, Ichimoku overlays function as:■ (^) Trend‐identification indicators
■ (^) Barriers to price action, that is, as support and resistance (except for Chikou
Span, which lags price)
■ (^) Bullish and bearish signals
■ (^) Leading indicators of future price barriers
■ (^) Trade triggers (mainly when price interacts with the cloud)
trend‐Identification Indicators
Being primarily based on moving averages, Ichimoku charts are particularly good
at identifying the presence of a trend. Here are some trend‐identification signals
found on Ichimoku charts:
■ (^) Tenkan‐sen rising above and falling below the Kijun‐sen. Whenever the Tenkan‐
sen crosses above the Kijun‐sen, it is an indication that a potential uptrend may
be in effect. Conversely, whenever the Tenkan‐sen crosses below the Kijun‐sen,
it is an indication that a potential downtrend may be in effect.
■ (^) Both Tenkan‐sen and Kijun‐sen rising above and falling below the cloud.
Whenever the Tenkan‐sen and Kijun‐sen cross above the cloud, it is an in-
dication that a potential uptrend may be in effect. Conversely, whenever the
Tenkan‐sen and Kijun‐sen cross below the cloud, it is an indication that a
potential downtrend may be in effect.
■ (^) Price rising above and falling below the Tenkan‐sen, Kijun‐sen, and cloud.
Whenever price crosses above the Tenkan‐sen, Kijun‐sen, or cloud, it is an in-
dication that a potential uptrend may be in effect. Conversely, whenever price
crosses below the Tenkan‐sen, Kijun‐sen, or cloud, it is an indication that a
potential downtrend may be in effect.
FIgure 16.10 Calculations for Ichimoku Overlays.