Ichimoku Kinko Hyo
Cloud is a complex indicators which consists of 5 lines. However, we will not
go into such details. We only talk about the practical part which is the cloud
as the name mentions. There are two colours of the clouds: usually red and blue
(depends on the tools used). In the following example, red is the supportive
cloud and blue is the resistive cloud. There are two main functions of the
cloud.
1 Cloud act as
support/resistant area
When stock price is
in the uptrend, stock price always above red cloud. Red cloud will serve as
supportive area. When stock price fall and touching the boundary of red cloud,
it usually will rebound.
2 Break Through Cloud
When the
stock price in an uptrend originally above the red cloud break through the red
cloud and stay below the red cloud, it is the sign of changing of trend. The
red cloud will subsequently change colour to blue cloud and blue cloud will
serve as the resistive area for the stock price.
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