After plotting candles and averages, the next step is to plot the two lines that form the actual Cloud.
The daily candles are here, in blue as we saw them before. The moving averages are calculated: pink for the 9 day and dark green for the 26 day.
2. The second line (turquoise), imaginatively called Senkou Span B (“Leading Span B”), is calculated by finding the highest price of the last 52 days, adding to it the lowest price of the last 52 days, and dividing by two. This is also plotted 26 days ahead.
So, although the two lines have similar names, their construction is very different. The space between these two lines is shaded - that is the Cloud.
Two halves of the market, plus time, lies at the core of the Ichimoku Kinko charting.
Another example of the Senkou Spans A and B, with coloured Cloud in between, can be seen in the CAD/SGD chart below.
Note how fat the cloud is early November and how thin it becomes mid-December.
And that’s it, as far as constructing the clouds goes. In the next chapter we’ll look at how to interpret the clouds.
The daily candles are here, in blue as we saw them before. The moving averages are calculated: pink for the 9 day and dark green for the 26 day.
Senkou Span A & B
1. The first line of the Cloud, the deep pink one, is known as Senkou Span A (“Leading Span A”) and is calculated by adding the Tenkan (9-day average) and Kijun (26-day average) values and dividing by two. This line is then plotted 26 days ahead of the last complete day’s trading.2. The second line (turquoise), imaginatively called Senkou Span B (“Leading Span B”), is calculated by finding the highest price of the last 52 days, adding to it the lowest price of the last 52 days, and dividing by two. This is also plotted 26 days ahead.
So, although the two lines have similar names, their construction is very different. The space between these two lines is shaded - that is the Cloud.
Senkou Span A
Senkou Span A is like a weighted average of the last 26 days, being the sum of the 9-day and the 26-day moving averages divided by two.Senkou Span B
Senkou Span B is similar to a 50% retracement level and is the mid-point of the last 52 days. Span B is often flat because extra weight is given to important highs and lows; these levels remaining in the calculation until either a new high or low is posted. Otherwise 52 days have to elapse for the level of the Cloud to change. The idea is of time marching on with support and resistance remaining constant at the 50% level during consolidation periods.Two halves of the market, plus time, lies at the core of the Ichimoku Kinko charting.
Another example of the Senkou Spans A and B, with coloured Cloud in between, can be seen in the CAD/SGD chart below.
Similar to trendlines
Many find the idea of plotting some sort of average price ahead of time extraordinary. But if you think of these lines not as averages, but as some sort of a trend, you will see that in theWest we often plot lines out into the future. Trendlines, of course, but also the lines that limit formations like triangles, the neckline of a head-and-shoulder top, broadening tops, and Gann fan lines too.And that’s it, as far as constructing the clouds goes. In the next chapter we’ll look at how to interpret the clouds.
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