Ichimoku Cloud (Ichimoku Kinko Hyo)The Ichimoku Cloud is a chart used to display support and resistance, momentum, and trend in one view. The cloud is shifted forward 26 days, so in theory, the cloud gives you a glimpse of the past, the present and a projected view of the future.
The Tenken and the Kijun are also known as the Conversion line and the Baseline. The Conversion Line (blue) is the fastest and most sensitive line. The Base Line (red) trails the faster Conversion Line (blue). The relationship between the Conversion Line and Base Line is similar to the relationship between a 9-day moving average and 26-day moving average.
The actual cloud is consists of Leading Span A and Leading Span B. Span A, green, should be above Span B, red, and a bullish cloud is green. The trend is up when prices are above the cloud, down when prices are below the cloud and flat when prices are in the cloud. The top and bottom lines of the cloud act as support when price is above them and resistance when price is below them as does the whole cloud in general. The uptrend is strengthened when the Leading Span A (green cloud line) is rising and above the Leading Span B (red cloud line). This situation produces a green cloud. Conversely, a downtrend is reinforced when the Leading Span A (green cloud line) is falling and below the Leading Span B (red cloud line). This situation produces a red cloud.
The Chikou span, yellow, is also known as the Lagging Span. A trend is deemed to be upward, or stronger when the Chikou span appears above the price, and downward, or weakened when the indicator appears below the price. Some watch the Chikou in relation to price and trade crossovers. It is also a momentum indicator.
Heiken- Ashi candles are also good indicators of the trend and can filter out market noise. Heikin-Ashi candles provide a simple method to incorporate averaging into price action analysis by making candlesticks themselves averaged. This causes candles to have a smoothened and continuous look making them them better to visualize trends. The main difference between them is that Heikin-Ashi candles are an averaged version of traditional candlesticks that uses also the data of the previous bar to produce the current candle's open price.
Just like with regular Japanese candlesticks, a Heikin Ashi candlestick, the smaller (or shorter) the shadow (or wick), the stronger the trend.
Green candles with no lower shadow signal a strong UPTREND.
Red candles with no upper shadow signal a strong DOWNTREND.
I have found it best to look at these candles in at least 2 timeframes, and even 3 different timeframes, to see the best view of the overall trend.
The cloud coupled with Heiken-Ashi candles, can give a quick glimpse of the trend, momentum and the strength of the trend as well as support and resistance levels.
It is apparent that this chart is bearish right now by taking a quick look and without being a "cloud expert"
