The Ichimoku Kinko Hyo Chart, has now been added to our Technical Indicator List. To use it Ichimoku Clould from the “Price Band” list.

Ichimoku cloud is a a multi-faceted indicator designed to give support/resistance levels, trend direction, and entry/exit points of varying strengths. General theory behind this indicator states that if price action is above the cloud, the overall trend is bullish, and if below the cloud, the overall trend is bearish. There are also moving averages (the Tenkan and Kijun lines) which act like the MACD crossover signals with the Tenkan crossing from underneath the Kijun as a bullish signal, while crossing overhead giving a bearish signal.

History
The Ichimoku Cloud was originally called the ‘Ichimoku Kinko Hyo.’ Where Ichimoku means ‘one glance,’Kinko ‘balance’ and Hyo ‘chart.’ Thus the full translation could best be described as ‘one glance balanced chart.’ Originally developed by Goichi Hosada pre WWII, a newspaper journalist (published in 1969) who wanted to develop an Uber-indicator that could provide the trader with various levels of support/resistance, entry/exit points, direction of the trend, and strength of the signal.

Ichimoku Kinko Hyo Technical Indicator is predefined to characterize the market Trend, Support and Resistance Levels, and to generate signals of buying and selling. This indicator works best at weekly and daily charts.

When defining the dimension of parameters, four time intervals of different length are used. The values of individual lines composing this indicator are based on these intervals:

• Tenkan-sen shows the average price value during the first time interval defined as the sum of maximum and minimum within last 9 days, divided by two

• Kijun-sen shows the average price value during the second time interval(26 d)

• Senkou Span A shows the middle of the distance between two previous lines shifted forwards by the value of the second time interval(clould upper)

• Senkou Span B shows the average price value during the third time interval shifted forwards by the value of the second time interval.(cloud lower)

• Chinkou Span shows the closing price of the current candle shifted backwards by the value of the second time interval.

The distance between the Senkou lines is hatched with another color and called “cloud”. If the price is between these lines, the market should be considered as non-trend, and then the cloud margins form the support and resistance levels:

1. If the price is above the cloud, its upper line forms the first support level, and the second line forms the second support level.
2. If the price is below cloud, the lower line forms the first resistance level, and the upper one forms the second level.

If the Chinkou Span line traverses the price chart in the bottom-up direction it is signal to buy. If the Chinkou Span line traverses the price chart in the top-down direction it is signal to sell.

Hope this Indicator helps you make more stronger decisions for entering, exiting a stock as well as Identifying Market Trend