Ichimoku Kinko Hyo
Technical Indicator Ichimoku Kinko Hyo is meant for determination of market trend, support and resistance levels and generation of buy and sell signals. It works the best at the weekly and daily charts.
Four time-frames of different length are used for defining of settings dimension. Rates of separate lines, composing this indicator are based upon these time-gaps:
Tenkan-sen shows average price for the first period, detected as a sum of maximum and minimum of this period divided into two;
Kijun-sen indicates average price for the second period;
Senku Span A shows the middle of distance between the previous two lines moved forward in the length of the second time period;
Senkou Span B shows average price of the third period moved forward in the size of the second time period.
Chinku Span indicates the closing price of the current bar moved backwards in the size of the second period. Distance between the Senkou lines is dashed on the chart by another color and called "cloud". If price is placed between these lines market is considered as non-trend and then borders of the cloud form support and resistance levels.
If price is above the cloud then its upper line becomes the first support level and second line – the second support level;
If price is under the cloud then down line becomes the first resistance level, and upper line – the second one;
If Chinkou Span crosses the price chart from the bottom upwards, it is the signal for purchase. If from the top downwards – signal for selling.
Kijun-sen is used as market movement ratio. If price is higher than Kijun-sen then prices will possibly continue rising. When price crosses the line, then trend reverse is probable. Another way of using Kijun-sen is giving signals. Signal for purchase is generated when Tenkan-sen line intersects Kijun-sen from the bottom upwards. From the top downwards – signal for selling. Tenkan-sen is used as market trend indicator. If this line rises or falls – trend exists. When it is horizontal – market came in the canal.