Ichimoku Cloud

The Ichimoku Cloud is a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction. It does this by taking multiple averages and plotting them on the chart. It also uses these figures to compute a "cloud" which attempts to forecast where the price may find support or resistance in the future.

The Ichimoku cloud was developed by Goichi Hosoda, a Japanese journalist, and published in the late 1960s. It provides more data points than the standard candlestick chart. While it seems complicated at first glance, those familiar with how to read the charts often find it easy to understand with well-defined trading signals.

• The Ichimoku Cloud is composed of five lines or calculations, two of which compose a cloud where the difference between the two lines is shaded in.

• The lines include a nine-period average, 26-period average, an average of those two averages, a 52-period average, and a lagging closing price line.

• The Cloud is a key part of the indicator. When price is below the cloud the trend is down. When price is above the cloud the trend is up.

• The above trend signals are strengthened if the Cloud is moving in the same direction as price. For example, during an uptrend the top of the Cloud is moving up, or during a downtrend the bottom of the cloud is moving down.