There are often differences between the Monthly, Weekly, Daily and Hourly charts. Sentiment regarding the future movement and support and/or resistance of a currency pair depends on the time horizon and entry point of the speculator. Ichimoku Cloud analysis takes into consideration that levels of support and/or resistance are not linear functions as is the case in Fibonacci Analysis, but instead support and resistance is defined by range and illustrated by the size of the cloud.
General theory behind this indicator states that if price action is above the cloud, the overall trend is bullish, and if below the cloud, the overall trend is bearish. There are also moving averages (the Tenkan and Kijun lines) which act like the MACD crossover signals with the Tenkan crossing from underneath the Kijun as a bullish signal, while crossing overhead giving a bearish signal.
Take the Weekly and Daily EUR/USD charts from Friday, September 7, 2012. Speculators trading the Weekly EUR/USD chart will notice a strong Bearish Ichimoku signal, with the Tenkan line not only crossing below the Kijun, but price action also occurring below the cloud (i.e. Very Bearish).
Conversely, speculators trading the Daily EUR/USD chart will notice a strong Bullish Ichimoku signal, with the Tenkan line not only crossing above the Kijun, but price action also occurring above the cloud (i.e. Very Bullish).
Support and resistance for the Weekly and Daily charts are visually represented by the top and bottom of the yellow cloud.
No comments:
Post a Comment