Saturday, May 19, 2012

The Dow Jones - Ichimoku Study - Week: 14 May to 18 May, 2012 - Gravity and Equilibrium revisited..

Gravity and Equilibrium revisited - Bingo!

Exactly 2 months ago when the Dow was at its peak - our Ichimoku study threw up a gem titled 'Gravity & Equilibrium' - here is the link (click).
At that time, we  saw the Dow gravitating down towards the Kumo.
Today, with half the journey done, we look back, and can repeat the last line of that post '..why else study?'

So here is this week's screen - do note that the Preamble now comes after the screen (and is for new readers).

Last 5 Signals seen on DJI 30 - Week Chart (EOW) as on chart below:

1. Chikou Span Cross: Strong Bullish Signal (C)
2. Tenkan Sen/Kijun Sen Cross: Neutral Bullish Signal (T)
3. Kumo Breakout: Bullish Signal (B)
4. The Flat Kumo: Bearish Signal (Ko)
5Tenkan Sen Cross: Weak Bearish Signal (red line)

The Arrows point to...

1. The Purple line is the Chikou Span - this one looks like it would touch and cross the Price line soon - Bearish Signal, if that happens.

2. The Price has stopped short of the Kijun Sen - Dark Blue line - Support here is considered good and Bulls can take heart from that. Bullish signal that.

Bears have done a good job of keeping the price below the Tenkan Sen (Red Line) for two weeks now. 
Bulls now need to use the Kijun Sen support to move the price above the red line.
From being a Bullish screen this one has become a Neutral one, from the Ichimoku point of view.

DJI 30: Medium Term View (or) Week Chart (or) EOW with the Ichimoku Cloud: 
DJI 30 - End of Week Chart - 18 May 2012  

Preamble (for New Readers):

.....Regulars can skip this part......


We do a weekly Ichimoku study, to complement our 'Triple Screen Technical Analysis', of the markets that we track, in our quest to master Technical Analysis.

When taking the 'weekly' time frame, to use the Ichimoku Cloud, we need to consider the following..

The standard settings for an Ichimoku Kinko Hyo chart are 9, 26, 52 and are used on EOD charts.  
When Ichimoku was created back in the 1930s, a trading week was 6 days long.  So we have one and a half week(9), one month(26) and two months(52). 
Now that the trading week is 5 days, we should actually use 7,  22 and 44 instead. 
However, the majority of systems, worldwide, still use the old settings 9, 26, 52. 

We need to study markets, on a weekly basis on this Blog.  
How do we fit 52, 26 and 9 into that need?  With one candle being one week?
There are 52 weeks in a year, 26 weeks form two quarters (or a half year) and 9 weeks equal about 2 months.  Fits the old logic - albeit differently.
Presto, we have a longer term view with the same settings!

So, if you like to move off the beaten track, for a change... do read on...

Quick Reference : 
Chikou Span - purple line,
Kijun Sen - blue line, 
Senkou Span A - black line, 
Senkou Span B - grey line, 
Kumo - grey shaded area,
Tenkan Sen - red line.

Useful resources (free) from the Web: