Ichimoku settings

by Malcolm Pryor on 15/07/2014
Ichimoku can be used on any timeframe. Here are the definitions of the 5 lines, and how they are constructed. The Turning Line: this is one of the 2 I leave off the chart, it is like a moving average; it is the midpoint of the high of the last 9 periods and the low of the last 9 periods. The Standard Line: this is the other one I leave off the chart, it is also like a moving average; it is the midpoint of the high of the last 26 periods and the low of the last 26 periods. Cloud Span A: this is one of the 2 lines used to construct the Cloud; it is the midpoint of the Turning Line and the Standard Line, but shifted 26 bars forward. Cloud Span B: this is the other line used to construct the Cloud; it is the midpoint of the last 52 bars, but shifted 26 bars forward. Note that both Cloud Span A and Cloud Span B have this element of being shifted 26 bars forward, and the area between them is shaded; this means that we can look ahead and see where the Cloud will be after the current period, which is useful. The Lagging Line is price shifted back 26 periods. The Lagging Line is key to my interpretation of Cloud Charts. Although some people use crossing of the Turning Line and Standard Line to generate trading signals (much like moving average crossovers) I don’t, and neither line is on my chart, as mentioned. The key components of my interpretation of Clouds are: 1) If price and the Lagging Line are above the Cloud that is bullish, if both are below that is bearish 2) The Cloud represents an area of support for price and the Lagging Line when they are above it, an area of resistance when below it 3) Unlike some I do not become bearish just because price penetrates the lower end of the Cloud, or bullish if price penetrates the upper end of the Cloud; for me to be bearish both price than the Lagging Line have to be below the Cloud, to be bullish both price and the Lagging Line have to be above the Cloud 4) Interpretation works best if at least 2 timeframes are examined 5) Ichimoku is only one of a range of techniques I use to analyse markets.

Extract from my latest (free) newsletter

by Malcolm Pryor on 17/01/2014
Here is an extract from my latest (free) newsletter, to sign up please go to www.sparkdales.co.uk. The key components of my interpretation of Clouds are: 1) If price and the Lagging Line are above the Cloud that is bullish, if both are below that is bearish 2) The Cloud represents an area of support for price and the Lagging Line when they are above it, an area of resistance when below it 3) Unlike some I do not become bearish just because price penetrates the lower end of the Cloud, or bullish if price penetrates the upper end of the Cloud; for me to be bearish both price than the Lagging Line have to be below the Cloud, to be bullish both price and the Lagging Line have to be above the Cloud 4) Interpretation works best if at least 2 timeframes are examined 5) Ichimoku is only one of a range of techniques I use to analyse markets.

Extract from my quarterly newsletter

by Malcolm Pryor on 30/07/2013
Here is an extract from my latest quarterly newsletter, go to www.sparkdales.co.uk to order the full (free) newsletter The basic concept of support and resistance is quite simple. Support is a price level at which previously a fall in prices has been halted. Resistance is a price level at which previously a rise in prices has been halted. A support / resistance level is more often than not a zone rather than a specific price. The value of the concept is that, once identified, support and resistance levels can be used as both entry and exit levels for trades. There are seven features of support and resistance which are important to bear in mind:- 1) The concept works on all timeframes 2) The longer the support / resistance has been in place the more likely it is to halt the next price movement 3) The more previous touches of the support and resistance levels the more likely the levels will halt the next price movement 4) Eventually all support and resistance levels are likely to be broken and this can then lead to powerful moves; it is therefore essential when using support and resistance to enter trades that traders protect themselves with stops in case the support / resistance levels fail 5) Small and brief breaks of support and resistance are common, therefore traders should avoid placing stops bang on the support and resistance levels 6) A false break out of a support / resistance level can lead to a powerful move in the opposite direction 7) Support once properly broken tends to become resistance; resistance once properly broken tends to become support

S&P500 May trend line break

by Malcolm Pryor on 28/05/2013
Assessment of the overall market should take priority when deciding which trading strategies to employ. Some bulls who had been enjoying the consistent up move which had been in force from mid April to mid May received a shock at the end of last week: bad economic data from China coupled with a hint that QE might be reduced in USA produced a downward move, although not nearly as violent as in Japan and also many European indices including FTSE 100. So what has happened from a technical point of view? You can see from the attached chart of the S&P 500 index that the mid April to mid May trend line drawn beneath the lows of the move was broken at the end of last week. A trend line break doesn't of itself turn an up move into a down move: if this was the beginning of a significant change then typically after the trend line break price will come back up again to test the most recent high. This test can be a higher high, and equal high or a lower high. The key is what happens at that test: if price continues on up, then last week was just a pullback in a continuing up trend, and analysts would simply draw another trend line to incorporate the new data. If on the other hand the test fails, price can make no further head way beyond the recent high, and starts to fall, then that could be the start of a more significant pullback. The test of the most recent high, around 1680, will be key for our analysis. Note that on the chart my favourite set of moving averages, the 13 26 and 52 day exponential moving averages are still very much in up trend mode, with the 13 above the 26 and the 26 above the 52. It would take a cross of the 13 down below the 26 to signal a change of trend using this technique, and the signal would be a change from up to sideways initially.

S&P500 analysis

by Malcolm Pryor on 12/02/2013
I tend to use the S&P500 index as a proxy for the overall market, even though based in the UK. To some extent the S&P is the "dog" that wags the FTSE 100 "tail". I have drawn 3 vertical lines on the attached chart of the S&P500 index.each partitioning off different phases of recent market action. Before the first vertical line is 2012, and there was a significant pullback in the up trend as fiscal cliff debates hung in the balance. Then between the first and second vertical lines are the first 2 days of 2013, with the year kicking off with a powerful buying spree (and short covering) producing a spike on the chart. Between the second and the third vertical lines the market was in a tight upward sloping channel following the spike of the first 2 days of the year. Now, after the third vertical line we have entered a period where that tight upward sloping channel has been broken and there is two way trading with many overlapping bars; ie the market action has become more sideways. This really should be a wait and see time, since from this sideways action the market could break either way, we could see a more extended pullback or a continuation of the former trend. Some analysts would estimate the chances are about 60% for a break to the upside, 40% to the down side. Note the three moving averages nearest to the price action are still clearly pointing up and are in up trend mode (they are 13 26 and 52 day exponential moving averages). If we were to see a more extended pullback some analysts would put the target as the beginning of the channel after the spike, ie around 1452.