The first example we will look at will be the German Dax stock market index.
In an uptrend with consolidation late July to October.
So this is very much a go-stop-go sort of chart pattern, and is useful to learn how Ichimoku analysis performs under different conditions.
Moving average crossovers have also worked well, with a hiccup in late August/early September, and a rather bigger problem from mid-October to early November. At the moment they are unlikely to cross for some time, so the 26-day average is more likely to act as the next support than any reversal sign. Note that when the market traded sideways, this line was not useful at all, with prices spending half their time above it and half below. The likelihood of it providing lasting and clear support looking forward is probably limited.
Again Senkou Span A stopped pullbacks on 29 August, 22 September (tiny little doji-type candles just below the top of the Cloud), but fared a lot worse late October.
The low point was again marked by a reversal candle, this time a decent, if not particularly big, hammer. Note also that at this point the Cloud had suddenly become dramatically thinner, a fact that allowed prices to drop below it, but then saw them trade up strongly through it once again.
The Senkou Span lines crossed over in early December: not important, other than the fact the Cloud was extremely thin, and as the market was such a long way from there it is immaterial.
Now the Cloud is getting fatter again and, although we are a very long way from its current level, by mid-January it should have caught up a little with prices and should provide support then.
Dax Index
You will see that the chart below contains many gaps, because, unlike the FTSE100 and DJIA indices, the Dax can (and will often) open away from the previous day’s close. The other two indices always open at the same price as the last close and will move up or down as bargains are struck in the different shares that make up the indices. Therefore we will not pay too much attention to these gaps in our analysis, only taking note of these when especially large gaps form, or when they are to be found around very important chart levels and patterns.Analysis
As can be seen from the above chart, prices had been moving steadily higher since November, after moving broadly sideways from late July to 28 October. Kijun-sen (the 26-dayMA) tended to be horizontal then, but after the 28th started moving higher at an angle just over 45 degrees - similar to what it had been doing in July. The long term bull trend which started in March 2003 has resumed.So this is very much a go-stop-go sort of chart pattern, and is useful to learn how Ichimoku analysis performs under different conditions.
Tenkan-sen
Tenkan-sen (the 9-day MA), has managed to cling quite closely to the highs and lows of the daily candles, limiting the very short term trend fairly nicely. It has held the downside of the last two days, but, should we get a close below here, it would be the first of a series of warning signals that prices might turn lower. At the moment there is nothing in the candles to suggest this is the case.Clouds performing well
The Clouds have performed well, with prices trading clearly above them in a steadily rising market and limiting downside slides nearly all of the time. The 7 July sudden drop reversed ahead of the top of the Cloud and formed, not quite a hammer, but a fairly powerful reversal candle nevertheless.Again Senkou Span A stopped pullbacks on 29 August, 22 September (tiny little doji-type candles just below the top of the Cloud), but fared a lot worse late October.
The low point was again marked by a reversal candle, this time a decent, if not particularly big, hammer. Note also that at this point the Cloud had suddenly become dramatically thinner, a fact that allowed prices to drop below it, but then saw them trade up strongly through it once again.
The Senkou Span lines crossed over in early December: not important, other than the fact the Cloud was extremely thin, and as the market was such a long way from there it is immaterial.
Now the Cloud is getting fatter again and, although we are a very long way from its current level, by mid-January it should have caught up a little with prices and should provide support then.
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