Ichimoku

Ichimoku Kinko Hyo is making technical analysis easier. It is a Japanese phrase which means “one-piece balanced table.”

Ichimoku consists of various moving averages (MAs). Each of these MAs serves a specific purpose and can help you understand the present market sentiment and forecast the future direction.

There are four basic components:

• The Ichimoku cloud (Japanese name: Kumo)
• The Base line (Japanese name: Kijun)
• The Turn line (Japanese name: Tenkan)
• The Delay span (Japanese name: Chiko)

Buy Signals:

If you see any of the following signals on a chart, it would suggest that the price may continue to go upward, so it is time to buy:

• If the price is moving above the Ichimoku cloud, this movement may indicate a bullish momentum in the market and is, therefore, a buy signal.
• When the Chiko (delayed) line moves above the cloud, it can be considered a buy signal.
• When the Tenkan (turn) line crosses above the Kijun (base) line, that crossing may indicate a shift in the market sentiment from bearish to bullish and therefore be a buy signal.

Sell signals

The following signals for selling:

• When the price moves below the Ichimoku cloud
• When the Chiko (delayed) line crosses below the cloud
• When the Tenkan (turn) line crosses below the Kijun (base) line

Other common interpretations

Besides pure buy and sell indications, Ichimoku Kinko Hyo can also help you identify support and resistance layers as well as provide a general understanding of market conditions. Here are some of the interpretations:

• If the five lines are parallel, the trend will continue in that direction.
• If the prices are inside the Ichimoku cloud, it means that the market is in the process of consolidation. This implies that the market is not a good time for trading.
• The lower band of the prevailing cloud can be used as a layer of support, which is a level that the price has difficulty breaking below.
• The upper band of the prevailing cloud can be interpreted as a layer of resistance. It is a price that the market has difficulty breaking above.

Fibonacci

The Fibonacci sequence is the series of numbers where each number in the sequence is the sum of the two numbers before it. It look like this : 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 . . .

The Fibonacci sequence can be applied in various areas. The Fibonacci retracement levels are used in technical analysis to calculate the alternate ratio between the numbers in the sequence.

By applying the ratios to an uptrend or a downtrend, you can identify support and resistance levels easily.

Here’s how the ratios are calculated: After the first few numbers if any number is divided by the succeeding number, the result would be around 0.618. For instance, 34 divided by 55 rounds to 0.618. If the ratio is calculated between alternate numbers, the result would be 0.382. The ratio between every 3rd succeeding number is 0.235. The sequence used in technical analysis consists of these ratios: 0.78, 0.618, 0.5, 0.382, and 0.236.

Fibonacci retracement level can be used as your profit target and create a limit order through a broker account to sell at that level. Based on the Ichimoku strategy, a sell limit order can be created either at the lower band of the Ichimoku cloud or a bit higher at the Fibonacci retracement level.