Ichimoku Trading

Ichimoku Analysis: Market still has room to fall

2010-02-08T13:09:00.000-08:00

The market was down again today. However, this time I sold my DXD for some more profit. The market still has the potential to continue this decline, but it might bounce too. So with that I'm happy with this profit and I'll be back into some more DXD should it bounce higher. You can see there is some support at the 9700 level for the Dow. The DJIA closed again below the Kumo Cloud. The Blue Line (Tenkan) is also below the blue now. I really don't see much positive going on, so hopefully I'll be able to get back into DXD prior to a larger fall.

Back below the Kumo Cloud

2010-02-04T13:38:00.001-08:00

The market ended the day in the tank, dropping 268 points. From an Ichimoku analysis standpoint, this put the index below the cloud again, for the second time in a week. I had sold out of my DXD earlier in the day with a profit, expecting the market to rebound. Instead it kept declining. I bought some more DXD about an hour before the close. Again, I'll need to keep a tight stop on this. This market is so choppy right now that if we regained all of today's loss on Friday I wouldn't be surprised. Nor would I be surprised if we dropped another 200. But again, closing below the cloud is a definite negative here, so I'm on the side of a continued decline.

Another negative Ichimoku sign

2010-02-03T09:44:00.000-08:00

There has been yet another bearish Ichimoku sign, albeit a weak one. The Kijun (red line) has crossed over the Tenkan (blue line). Definitely a bearish signal - however it's occurred above the cloud, so its considered a weak sign. The Dow continues to trade within the cloud. After closing below the cloud, it did rebound pretty solidly for the past 2 days. So, we are sort of in a state of limbo here, although there are more negative signs here than Bullish ones.

My strategy here is to take profits in long positions and continue to add to my DXD but with tight stops, should the market start driving up.

Indices closed below the Kumo Cloud today - definitely a bearish Ichimoku signal

2010-01-29T13:46:00.000-08:00

Today, the markets closed down and you can see that both the S&P and the Dow closed below the Kumo Cloud - a decidedly bearish signal. Breaking through the cloud either way is either a bearish or bullish sign - closing above the cloud represents a bullish one, below the cloud, a bearish one. Our markets continued their descent today giving yet another signal that we could see a continued decline. If you haven't bought some DXD yet, you might want to at least start adding a little, or at the very least taking whatever profits you have in stocks in which you are long.

I think that its worth noting here, that in the past 9 months, this is the first time we've closed below the Kumo cloud. I don't think that is a good harbinger..

Still negative Ichimoku charts - and a way to play it.

2010-01-26T12:41:00.001-08:00

You can see that despite the fact that yesterday ended up slightly and we were up earlier today, the DJI charts are still looking negative. We have yet to experience the complete breakout of the red line over the blue one - however, the current pricing still remains buried in the Kumo cloud. To profit from what I'd anticipate will be a market downturn, I've bought some DXD - an ultra short on the Dow. You can see that chart is looking bullish - however, a weak bull as the blue crossing over the red is occurring under the cloud. With about 15 minutes to go in the market trading day, the Dow has just turned negative for the first time all day. Hopefully this is the start of an extended downturn.

downward market signs being given by Ichimoku analysis

2010-01-22T14:45:00.000-08:00

I know, it's been a very long time with no post. My bad! Anyways, since last summer, things have been plugging away without much downwardness.

However, let's take a look at 2 graphs for the SPX & DJI.

Things are starting to break down on both charts, in fact it started yesterday. Both broke below and closed below the RED line. Also, the Chikou span is below the lagging prices. 2 negative signs. That being said, it could be a headfake - there is still no red surpassing the blue lines - that crossover hasn't happened yet. Looks like it's coming, however - but I wouldn't bet on it. Furthermore, even if that does happen, it's going to happen above the Kumo cloud though - so its a weak bear sign.

I think this is a good time to take any profits you have right now. It's best to be on the sidelines here until there is some definitive movement either way. The next bear signs are going to be if there is the red over blue crossover, or if there is further market decline and it closes below that Kumo cloud - which would be 9973 on the Dow or 1069 on the S&P.

7.11.2009 - Market Commentary - The Power of Ichimoku

2009-07-11T10:18:00.000-07:00

If you were a doubter in Ichimoku charting, hopefully the past few weeks have either made you a believer or at least reduced some of your doubt! Going back to our post on 6.16.2009 - "Definitely not good news for bulls today as both the Dow and S&P closed with a bearish Ichimoku sign - both closing below the Kijun lines. I'm definitely going to pick up some short positions tomorrow, I think we have some more downside to this."

On 6.16, the S&P closed at 912 and the Dow closed at 8504. As of Friday's close, the Dow was at 8146 and the S&P was at 879. One of the down sides to the ThinkOrSwim charts that I post here is that they don't show the full cloud. Here is the formula for the 2 lines that form the cloud:

Span A = (Tenkan + Kijun)/2 for the past 52 sessions pushed out 26 sessions.

Span B = (Highest high + Lowest low)/2 for the past 52 sessions pushed out 26 sessions.

So you can see from the StockCharts.com that the S&P Kumo cloud is headed up while the S&P Index is headed down. This is important because when the closing price breaks through the bottom of the cloud, its another bearish sign. It really does seem like its going to be inevitable that this does happen and more decline is very likely.

I'm still long my SDS and DOG - both short ETF's on the S&P and Dow respectfully and short some Allstate (ALL). Long is no place to be right now.

This recent activity has really confirmed that the Ichimoku method is powerful and a great indicator. If you are interested in reading more about it and how to apply it - there is a book available for the Amazon Kindle here - http://tinyurl.com/nykgp5

7.7.2009 Market Commentary - Still more room to fall

2009-07-07T19:31:00.001-07:00

The market is dropping as I expected based on the Ichimoku charts. You can see on the S&P chart that it's back to trading inside the cloud; we still have the Kijun line above the Tenkan (Pink over Blue) and a validating signal from the Chikou Span (red line trading below historic prices). Today it closed below the top of the cloud which had been providing support over the last 2 trading sessions. I believe this still has more room to drop.

Everything I said above about the S&P can also be related to the DJIA chart above as well. Look for some support around 7900, but that is still over 260 points below where we are now. I am still holding by long positions in the short ETFs - DOG and SDS.

If you are interested in learning more about Ichimoku charting, there is a book available for the Amazon Kindle here - http://tinyurl.com/nykgp5

7.3.2009 - Market Commentary

2009-07-03T10:06:00.000-07:00

The market finally cracked the past 2 days and started to head down. You can see from the Ichimoku charts that the Dow hit the support line - the top of the cloud. The S&P is right above it. It still looks like we could continue this slide, especially if we don't see a big gain on Monday - I continue to hold my short positions and index ETF shorts.

The Kijun (pink) is still above the Tenkan (blue) line. Monday should be interesting!

If you are interested in learning more about Ichimoku charting, there is a book available for the Amazon Kindle here - http://tinyurl.com/nykgp5

6.29.2009 - Market Commentary

2009-06-29T10:10:00.000-07:00

The markets are continuing to rise today. It might be the "window dressing" as mutual fund managers make their purchases so they can report their holdings at the end of the quarter. Ichimoku charts are still showing bearish signs, so I believe this is still a good time to start shorting.

6.25.2009 - Market Commentary

2009-06-25T09:55:00.000-07:00

No real surprises here. You can see that as I mentioned yesterday, the market is up and reaching for the Kijun line (pink). I firmly believe that will be about the top of this advancement. But..the big news is that we finally have the bearish signal of Kijun/Tenkan (pink line crossing over the blue lines) crossover for both indices.

I'd use these levels to realize any gains you have in long positions and start finding some shorts or index short ETF's.

If you are interested in learning more about Ichimoku charting, there is a book available for the Amazon Kindle here - http://tinyurl.com/nykgp5

6.24.2009 - Market Commentary

2009-06-24T08:18:00.000-07:00

The markets are up this morning - as we speak, the S&P is up almost 14 points and the DJIA is up almost 90. What the hell? Here's what I think is going on, and it's expected - and it does provide a great opportunity I believe. Look at the pink line (Kijun) line on the S&P chart. If you notice it's pretty flat recently at that 917 line. Same thing for the Kijun line on the DJIA chart at the 8550 line. When you get a very flat Kijun line or Kumo line, you will usually get a reversion back to that level as the market figures out which way it wants to go. So to to see a gain today is really not surprising in the short term based on these Ichimoku charts.

However, what you should really be seeing from these 2 charts is the convergence of the blue line and the pink line (Kijun rising towards the Tenkan lines.) Obviously when that happens, its a pretty negative sign indicating falling prices. I would guess that crossover happens in the next few sessions. The current support level is the top of the Kumo cloud for each index - DJIA is 8300 and 891 on the S&P. If we close below those levels, you could easily see a drop to the bottom of the Kumo cloud which would put the DJIA at 7530 and the S&P at just under 800.

So what I've done this morning is purchased some more DOG - the short ETF for the Dow 30. I think this is a great opportunity to take gains on any longs you have (non short ETF's) and add to any short positions or short ETF's. This will probably be the last gasp for a while of rising markets.

If you are interested in learning more about Ichimoku charting, there is a book available for the Amazon Kindle here - http://tinyurl.com/nykgp5

6.23.2009 Market Commentary and DOG & SDS purchase

2009-06-23T15:45:00.001-07:00

The market was basically flat today - the S&P was actually up very slightly (+2.06 points) and the DJIA was down just over 16 points.

You can see from the Ichimoku charts above that both indices used the top of the Kumo cloud as support then bounced slightly off it. I'd guess we'll continue to see that for a few sessions, and from there determine the true direction of where this market is headed. You can also see that it looks like we are clearly headed for a pink over blue crossover which would be a further bearish sign.

So how to play this? I purchased 2 ETF's both are betting on the indices to decline. I bought some (DOG) ProShares Short Dow 30 and some (SDS) ProShares UltraShort S&P500. You can see the charts above. Both are sort of premature purchases if you look at these charts. I think you'll see both give some strong buy signals here in the next few sessions - I'll keep you updated as it progresses. Obviously right now, blue line is over the pink line and they are trading below the clouds, so a bit bearish, but again, based on the underlying index charts I think the trend is headed bullish on these 2 contra funds.

If you are interested in learning more about Ichimoku charting, there is a book available for the Amazon Kindle here - http://tinyurl.com/nykgp5

2009-06-22T13:13:00.000-07:00

The DJIA was down over 200 points today and the S&P declined over 28 points. Looking at the Ichimoku charts, you can see that both indices started the day right near the resistance level at the Kijun (pink) line. From there it was a down day with a last minute push even further down. The Bears are firmly in charge here, and I think we're at the start of a real pullback - especially if we don't rebound tomorrow. Confirmation of that will come when we get a Kijun over Tenkan showing - when the pink line overtakes the blue.

6.21.2009 - Market Commentary

2009-06-21T10:42:00.000-07:00

The markets continue their sideways trend and the DJIA is using the Kinjun (pink) as its resistance level. The S&P has had a little more success in the past few days and its trading slightly above the Kijun and is using it more as a support than a resistance. You can see this occurring in the Ichimoku charts above. There still has been no pink over blue (Kijun over Tenkan crossover) to truly indicate a change in market sentiment.

So how do you trade this market? I've reduced all open positions to one long (ISIL) and one short (ALL). It really could go either way. However, if I had to guess, it will probably start a bit of a pullback given the fact that we have had the big run up since March. The name of the game is definitely be flexible, lighten positions, take profits when you get them and be nimble - able to short or long the market depending on what you're being told by the charts and the market. Kijun levels are 918 for the S&P (closed at 921 on Friday) and 8549 on the Dow (closed at 8539 Friday).

If you are interested in learning more about Ichimoku charting, there is a book available for the Amazon Kindle here - http://tinyurl.com/nykgp5

6.17.2009 Market Commentary and short ALL

2009-06-17T13:10:00.000-07:00

Today the S&P and Dow Jones both continued their decline - albeit at a slower rate. At the open I sold most of my positions, I'll post those results soon. I also shorted Allstate (ALL).

The Ichimoku chart above you can see has turned very negative for ALL.

I think we'll continue to see negative trading sessions for a while, and being short is the only way to make any money from that. You can see from the above S&P chart that today's trading range used the Kijun (pink) line as resistance - touching it then declining again. So what we'll be looking for to turn the downwards trend around is for it to close above the Kijun line.

6.16.2009 - Market Commentary - bearish sign given

2009-06-16T15:14:00.001-07:00

Definitely not good news for bulls today as both the Dow and S&P closed with a bearish Ichimoku sign - both closing below the Kijun lines. I'm definitely going to pick up some short positions tomorrow, I think we have some more downside to this.

You can see the Dow closed at 8504 versus a Kijun support line of 8549 and the S&P closed at 912 versus a support at 917. A pullback has been projected for some time by market commentators so this may be the start of it. Keep in mind, this is a mildly bearish sign. What we don't want to see is the Pink over Blue cross over. We already have the Chikou Span validation of the bearish sign - but barely. This is the first time in this upward march that we've closed below the Kijun support.

My action plan is this - liquidate most of my positions and take some shorts. I'll keep you posted on which shorts I decide on - I sold my Allstate this morning, luckily while there was a slight gain in it. But that stock looks ripe for some short picking, and I think I'm on that. There are many others on the list, though.

6.15.2009 - Market Commentary

2009-06-15T21:11:00.000-07:00

Markets fell quite a bit today but from an Ichimoku standpoint we are still in good shape. You can see that both the S&P and the Dow used the Kijun (Pink) line for support - something that you can see happened repeatedly a few weeks ago and then we continued upwards. So I think we can remain cautiously bullish. Some bearish numbers would be the S&P closing under the Kijun at 915 and the Dow closing under its Kijun at 8512.

I do need to get out of my Allstate (ALL) position, as its setting up bearishly - but I didn't want to do it on such a down day. Hopefully we'll get a jump up tomorrow and I can dump it then.

6.12.2009 Long ISIL and NTRS

2009-06-12T08:16:00.001-07:00

This morning I bought Intersil (ISIL) and Northern Trust (NTRS).

I had sold Intersil a few days ago since it had run up so quickly. I sold it at $13.20. This morning I was able to get back in at $12.92. The chart still looks very positive, and I'd guess that it will get back up to above the $13.50 level in the next few trading sessions.

NTRS's Ichimoku chart is above. You can see that the buy signal of the blue over pink line crossover occurred a few days ago, it tried to push through the cloud, failed and has retreated a little. Chikou span validation while not currently occurring will occur in the next 2 sessions at current pricing. I'll set the stop at $54. I bought it at $55.00

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6.11.2009 - sold DIS

2009-06-11T10:23:00.001-07:00

This morning I sold my Disney stock (DIS). You can see from the chart above that it's very close to a bearish indicator occurring when the Kijun (pink) lines crosses above the Tenkan (blue). It didn't produce quite the gain I was hoping for...however, that being said, I came to the party a bit late. You can see the initial cross over came back in March - right about when most stocks had their crossover indicating the end of the months long decline. I am more than happy to take the gain off the table though.

Here are the trade details.

Bought on 5.20 & 5.21.2009 for an average price of $23.64 and sold it today for $25.50. 8% gain.

6.10.2009 - sold ISIL and ALTH

2009-06-10T13:17:00.000-07:00

Today I took profits in both Intersil (ISIL) and Althos (ALTH). Both are still looking good from an Ichimoku standpoint. However both hit resistance again today and failed to break through. When this has happened in the past both have dropped.

First let's look at ISIL. You can see that right around $13.25 is the resistance for this stock, then it declines again. The thought behind my trade is that I'm assuming that the resistance will hold here, and you'll see a decline again to the mid-$12's, at which point I'll hop back into it.

Next, let's look at ALTH. Same thing - you can see the resistance level is at around $7.75. Again, the Ichimoku chart looks really good, so I'd expect to try to re-enter this stock at around the $7.25 level.

Here are the trade stats:

Bought ISIL 6.3.2009 at $12.03, sold today at $13.20. Gain of 10%.

Bought ALTH 5.27.2009 at $6.89, sold today at $7.70. Gain of 12%

6.8.2009 Update

2009-06-09T13:10:00.000-07:00

Sorry for no post yesterday, and honestly I really have nothing new to report today either. The market is chugging along relatively unchanged. I haven't made any changes to my holdings. The past 2 days have been relatively good. Intersil (ISIL), Disney (DIS) and Allos Therapeutics (ALTH) are all up over 5% from where I bought them. No updates from an Ichimoku standpoint - all indices are still very bullish.

No news is good news. It's nice not to have to trade every day, but rather just watch things coast along.

6.6.2009 - Market Update

2009-06-06T11:41:00.001-07:00

The market continues to be very strong from an Ichimoku standpoint. You can see that from both charts Dow and S&P - everything is very bullish. They are both trading above the cloud, Chikou span validation, and Tenkan over Kijun lines. My open positions are all doing relatively well and I'm feeling very positive about the portfolio right now. The one exception to this is Citigroup (C). There has been a cross in lines. The Kijun has turned and overtook the Tenkan line. That being said, I'm not going to sell it as I think the market as a whole will lift it and allow it to turn a profit eventually. I hate to divert from the Ichimoku strategy, but I think this will work out in the long term.

Next week I'd assume the general direction will continue to be trending upwards.

If you have any questions on the Ichimoku charts or a particular stock let me know in the comments.

6.3.2009 updates ISIL & UPS

2009-06-04T10:12:00.000-07:00

Welcome, Ichimoku fans!

I took the opportunity to cover my UPS short on this down day. I took a loss on it and the market is just to strong to short still. I took a chance that it was going to be a more conducive market in which to short. Not the case as the market continues to be very strong. I shorted at $49.97 and covered at $51.20. It's down under 51 today, so who knows how it will turn out. The chart is still very bearish on it, but I can't short in this market. It's just too strong still. It has been up over $54, which had me really upset. Therefore, I'm not going to look back over this small loss.

On 6.1.2009 I sold my ISIL. I don't think I put it in the blog, but I did Twitter about it @TradeTheCloud

Purchased it on 5.29.2009 for $12 sold it for $13 on 6.1.2009 - a pretty good gain for a few days of holding it. On yesterday's down day, it dropped back down to actually under $12, but I was able to buy back into it at $12.03.

Market is very strong still - despite yesterday's drop.

6.2.2009 Long OLN

2009-06-02T14:15:00.000-07:00

This morning I bought some Olin (OLN). The chart looks like it is setting up for a run here. Looking at the Ichimoku chart, we are right at the Tenkan/Kijun crossover. It will come out of the cloud for another bullish signal at $14.58. You can see that we'll get Chikou span verification in the next day or so provided the pricing holds up. So it is just at the crossover point, this could deteriorate, but I'm willing to take a chance on it, given the bullish nature of the overall market.