What’s this Ichimoku technique people are talking about nowadays?
Ichimoku Technique is a kind of candle stick indicator that helps in finding future support, trend change, short term support, medium term support, pullback and breakout.
There are few indicators in the charts whose names are confusing and the way they are formed are not much important if you have the indicator and understand what they signify. You will break your head understanding it for long hours and even days.
I will try to explain Ichimoku technique in less than 15 mins with example.
The below chart is Latest NIFTY 15 mins chart (15 mins chart for Short term traders) It has Ichimoku Indicator overlayed on it.
There are 3 lines and a cloud in Ichimoku system:
- Blueline (Short term support indicator): You can find that the NIFTY is finding short term support on this line.
- Redline (Medium Term Support Indicator): Redline is medium term support indicator and has lots of significance. If Redline is trending up then the stock is bullish. If the Redline is facing down, the stock is bearish. If the Redline is straight for a while, It acts as a magnet to the stock. Stock will be pulled to the Redline.
- Greenline (Breakout Indicator): Greenline is Breakout Indicator and it lags 14–21 sessions on charts. You can see the greenline is running one day delay. If the Greenline is moving away from the candle sticks into a fresh blank zone, it indicates breakout. If it moves down, its a breakdown indication. If it moves up, its a upside breakout Indicator. An upside Breakout is shown the image above with a light green arrow, Breakout is seen in 3 different places on the chart but at the same price and time.
- Cloud (Future support and resistance cloud): We have seen that the Greenline lags in the charts, Here The cloud leads in the chart by 14–21 sessions. If the cloud is green, the Stock is bullish and If the cloud is red, the stock is Bearish. Cloud twist or the colour change indicate change in trend. Cloud provides strong support to the stock. If the stock breaks past the cloud, it indicates Stoploss has been hit and fresh trend reversal is happening.
You can see in the above charts, a Cloud twist, Greenline breakout and Candle stick breakout from the cloud aroud 10110. NIFTY has rallied 150 points from then. (Breakouts are indicated in Light Green color.)
Adding an example to Breakdown Happening in NIFTY at 10350 on 29th November 2017. NIFTY has corrected 300 points after the breakdown.
Note: All the lines and clouds are formed based on some formula of averages of highs and lows of last few candles.
I personally use Tradingview for technical charts. (It’s free for End of Day analysis.)
Above charts are fromwith Ichimoku indicator layed on 15 mins charts of NIFTY.
To learn the depth of Ichimoku lines and cloud, you can always buy this book from Amazon..
Both the above links are affiliated.
Please share and comments your thoughts.