Transcript Document

Technical Analysis Workshop Series
Week 9
Ichimoku Kinko Hyo
DISCLOSURES & DISCLAIMERS
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INTRODUCTION
REVERSAL
PATTERNS
PRACTICE
DISCLOSURES & DISCLAIMERS
Nothing in this research material constitutes a representation that any investment strategy or
recommendation contained herein is suitable or appropriate to a recipient’s individual
circumstances or otherwise constitutes a personal recommendation. It is published solely for
information purposes, it does not constitute an advertisement and is not to be construed as a
solicitation or an offer to buy or sell any securities or related financial instruments.
No representation or warranty, either expressed or implied, is provided in relation to the
accuracy, completeness or reliability of the information contained herein. The research material
should not be regarded by recipients as a substitute for the exercise of their own judgement. Any
opinions expressed in this research material are subject to change without notice.
CHART TYPES
SUPPORT &
REVERSAL
RESISTANCE
PATTERNS
TRENDLINES &
CHANNELS
PIVOT
POINTS
S
Content
•
•
•
•
•
Introduction to Ichimoku
Components of Ichimoku
Trading Strategies
Case Studies
Conclusion
Introduction to Ichimoku
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Ichimoku
• Ichimoku Kinko Hyo – “Equilibrium at a
glance”
• A trend trading system
• Developed by Goichi Hosoda in 1930s
• Candlestick charting complements Ichimoku
• Concept similar to moving averages
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Ichimoku
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Components
• 5 main components in Ichimoku,
I.
II.
III.
IV.
V.
Tenkan Sen (“Conversion Line”)
Kijun Sen (“Base Line”)
Chikou Span (“Lagging Line”)
Senkou Span A (“Leading Span A”)
Senkou Span B (“Leading Span B”)
PLUS 1 additional: Kumo (“Cloud”)
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Components
Chikou Span
Senkou A
Tenkan
Kijun
Senkou B
Kumo
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Component 1 – Tenkan Sen
• Tenkan Sen
(“Conversion
Line”) –
Plotted by
calculating
(High +
Low)/2 of last
9 days
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Component 2 – Kijun Sen
• Kijun Sen
(“Base Line”)
– Plotted by
calculating
(High +
Low)/2 of last
26 days
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Component 3 – Chikou Span
• Chikou Span
(“Lagging
Line”) – Close
of today’s
price, shifted
26 days back
26 days
26 days
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Component 4 – Senkou Span A
• Senkou Span
A (“Leading
Span A”) –
(Conversion +
Base Line)/2,
plot 26 days
forward
26 days
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Component 5 – Senkou Span B
26 days
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
• Senkou Span
B (“Leading
Span B”) –
(High +
Low)/2 of last
52 days, plot
26 days
forward
CONCLUSION
Additional Component - Kumo
• Kumo
(“Cloud”) –
Area
between
Senkou Span
A and B
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Short Summary
• Tenkan/Kijun Sen – Similar to moving averages
• Chikou Span – Shows current price relative to 26
days ago (bullish or bearish)
• Senkou A – average of past 26 T/K shifted forwards
by 26 (indicating short term equilibrium)
• Senkou B – average of past 52 T/K shifted forwards
by 26 (indicating long term equilibrium)
• Kumo – Area between Senkou A&B – forms S/R area
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
The Kumo - 雲
• Kumo is the
most
prominent
and
important
feature of the
Ichimoku
system.
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Interpreting the Kumo
Main function of the Kumo is to
provide direction and areas of
support and resistance (S/R)
Which mainly depends on size,
position and colour of the cloud.
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Interpreting the Kumo (Position)
• Price below
cloud – Bearish
• Price above
cloud - Bullish
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Interpreting the Kumo (Colour)
• Pink – Bearish
• Blue – Bullish
•
INTRODUCTION
COMPONENTS
STRATEGIES
(actually depends on what
colour you choose..)
CASE STUDIES
CONCLUSION
Interpreting the Kumo (Size)
• Thin cloud –
weak S/R
• Thick cloud –
strong S/R
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Trading Strategies
Warning
Ichimoku is a system that make use of the 5+1
components together to produce higher
probability trades.
Attempts to use the following isolated trading
strategies may produce mixed long term success at
best
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Trading Strategies
Signals produced by the isolated strategies are
usually ranked by strength when checking for
confluence with the other components
i.e. Strong, neutral, weak signals
(Examples will be shown)
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Trading Strategies Introduction
• 5 Strategies
1.
2.
3.
4.
5.
Tenkan/Kijun Cross
Kijun Sen Cross
Kumo Breakout
Senkou Span Cross
Chikou Span Cross
INTRODUCTION
COMPONENTS
STRATEGIES
More commonly used
CASE STUDIES
CONCLUSION
Strategy 1 – T/K Cross (Strong)
• Strong signal
for buy.
Tenkan(pink)
crossed above
Kijun(Blue)
• Chikou above
cloud/price
• Price above
cloud
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Strategy 1 – T/K Cross Result
• A nice
uptrend, with
another
additional
long
opportunity a
month later
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Strategy 1 – T/K Cross (Weak)
• Weak signal
to short the
market
• Price above
cloud
• Chikou above
cloud/price
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Strategy 1 – T/K Cross (Neutral)
• Neutral signal
to buy
• Price above
cloud
• Chikou above
cloud/price
• BUT cross
happened in
the cloud
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Strategy 2 – Price/Kijun Cross
Green arrows – Strong signals
Red arrows – neutral/weak signals
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Strategy 3 – Kumo Breakout
Green arrows – Strong signals
Red arrows – neutral/weak signals
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Case Study 1a - Olam
21 Jan 2013
Possible Strategy – Wait and
see, if it breaks cloud
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Case Study 1b - Olam
14 Mar 2013
Cloud breaks – but weakly
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Case Study 2a – Apple Inc
18 Jan 2013
Possible Strategy – buy a put
option (ATM/OTM)
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Case Study 2b – Apple Inc
13 Mar 2013
Profit! Close to $70/share
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
18 Jan 2013
Case Study 3a – Ralph Lauren Corp
Possible Strategy – don’t use
ichimoku! Rely on traditional
S/R methods
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
18 Jan 2013
Case Study 3b – Ralph Lauren Corp
Ichimoku won’t work well in
sideway markets!
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Conclusion
• Ichimoku is a powerful trend following system
• Traditional methods of S/R can be
incorporated to determine target prices
• Do not follow the system blindly, be flexible!
Note:
The content is not exhaustive, there are a lot
more things to Ichimoku than what’s covered
in this lesson!
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Further Readings
• www.kumotrader.com/ichimoku_wiki/
• Trading with Ichimoku Clouds
by Manesh Patel
INTRODUCTION
COMPONENTS
STRATEGIES
CASE STUDIES
CONCLUSION
Thank You! 
CHART
CONSTRUCTION
SUPPORT &
RESISTANCE
Q&A
CHART
CONSTRUCTION
SUPPORT &
RESISTANCE