We’ll look again at the chart we saw a little earlier.
Note how quickly Chikou Span (dark green line) drops to the cloud in December, then clings within the cloud’s upper and lower boundaries.
Chikou Span is used in combination with today’s candlestick:
• if Chikou Span is trading above the candlestick of 26 days ago, then today’s market is said to be in a bullish long term phase; conversely,
• if Chikou Span is trading below the candlestick of 26 days ago, then today’s market is in a long term bearish phase.
Same idea for Chikou Span itself and the Clouds: above the Cloud of 26 days ago, then today is bullish - and vice versa.
It is a good idea to make a list of these levels first thing in the morning, as it can be quite fiddly and time consuming to have to keep checking back on the levels while trading.
Note that problems can arise if the candles around Chikou Span are very tall. It can be difficult to decide whether a level has been broken decisively. In this case I would wait until the end of the day to see whether the closing level of the line is clearly above or below the big candlesticks.
• in a bull market Chikou Span and the Clouds provide a solid base, and above you is nothing but clear blue skies which will not hamper your way up; conversely,
• in a bear market, Chikou Span and dark heavy Clouds will grind you down and push you lower.
Very steady and strong bull trend despite rather thin clouds. No resistance whatsoever.
Heavy clouds are grinding prices lower.
So you see the Clouds which are plotted ahead of time, coupled with today’s price that is plotted behind time, are the really innovative elements that differentiate this type of charting from conventionalWestern analysis.
We shall now work through two charts in detail so you can understand the exact steps to take.
• if Chikou Span is trading above the candlestick of 26 days ago, then today’s market is said to be in a bullish long term phase; conversely,
• if Chikou Span is trading below the candlestick of 26 days ago, then today’s market is in a long term bearish phase.
Same idea for Chikou Span itself and the Clouds: above the Cloud of 26 days ago, then today is bullish - and vice versa.
Support and resistance for Chikou Span
Finally, the position of the candlesticks themselves, the moving averages, and the Clouds are also levels of support and resistance for Chikou Span. These will give suggestions where today’s support and resistance lie. The 9 and 26 day moving averages also act as support and resistance for Chikou Span.Note that problems can arise if the candles around Chikou Span are very tall. It can be difficult to decide whether a level has been broken decisively. In this case I would wait until the end of the day to see whether the closing level of the line is clearly above or below the big candlesticks.
Interpretation summary
Try to visualize the whole analysis as follows:• in a bull market Chikou Span and the Clouds provide a solid base, and above you is nothing but clear blue skies which will not hamper your way up; conversely,
• in a bear market, Chikou Span and dark heavy Clouds will grind you down and push you lower.
We shall now work through two charts in detail so you can understand the exact steps to take.
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