Ichimoku Cloud Indicator | Indicator Series

Posted on by

The Ichimoku Cloud indicator was published in the late 1960s by Goichi Hosoda, a Japanese journalist.  This technical analyst tool is a collection of indicators that show support and resistance levels, momentum, and trends.  Support and resistance levels indicate a stock price that is barricaded from being nudged in a certain direction by price levels.  Momentum is the speed at which an asset’s volume or price accelerates.  Trends indicate a buying or selling position.

Five Indicator Lines

There are five indicator lines on the chart to pay attention to when using the Ichimoku Cloud.  (Try out indicators on Tradingview.com)

  • The tenkan sen or the conversion line is the nine-period average.  
  • The kijun sen or base line is the 26-period average.   
  • The senkou span A or leading span A is the average between the nine-period and 26-period average.
  • The senkou span B or leading span B is the 52-period average.
  • The chikou span or lagging span is the closing price line plotted 26-periods in the past.

The shaded area between the leading span A and the leading span B is considered the cloud.

Ichimoku Cloud Indicator | Indicator Series Click To Tweet

Three Ways Of Trend Analysis

  • When the conversion line rises above the base line, this indicates an upward trend.  When the conversion line falls below the base line, this indicates a downward trend.  
  • When the stock or asset is trading above the cloud, the shaded area between leading span A and leading span B, this is considered an upward trend.  When the stock or asset is trading below the cloud, changing the cloud from green to red, this indicates a downward trend.  Prices are without trend changes when they are in the cloud.
  • When the conversion line rises above the base line, above the cloud, this confirms an upward trend.  When the conversion line drops below the base line, below the cloud, this confirms a downward trend.

It is recommended that the Ichimoku Cloud should be used with other technical analysis tools.  This indicator is usually paired with the Relative Strength Index (RSI).

Subscribe to tradingview.com for free to get great ideas from other traders.