Ichimoku Cloud

Trend

What it measures

The Ichimoku Cloud is a comprehensive trend system with five components: Tenkan-sen (conversion line, 9-period), Kijun-sen (base line, 26-period), Senkou Span A and B (form the 'cloud' or Kumo), and Chikou Span (lagging line). It provides support/resistance levels, trend direction, and momentum signals all in one indicator. It was developed in Japan and is particularly popular in Asian markets.

How readings are interpreted

Price above the cloud indicates an uptrend; below the cloud indicates a downtrend; inside the cloud is a neutral zone. The cloud itself is projected 26 periods ahead as a forward support/resistance zone. When Span A is above Span B, the cloud is bullish (green). A thick cloud provides stronger support/resistance than a thin one.

Conventional levels

Price above cloud (Kumo): bullish trend — buy pullbacks to cloud top
Price below cloud: bearish trend — sell rallies to cloud bottom
Price inside cloud: neutral — avoid directional trades
Tenkan/Kijun cross (TK cross): short-term momentum signal (above cloud = strong buy)
Chikou Span above price: confirms bullish momentum; below = bearish
Span A crosses above Span B: bullish cloud — uptrend strengthening

Where it works, and where it does not

Works well on daily and weekly charts for trend identification. Designed with Japanese market hours in mind — some traders adjust periods for 24/7 crypto markets (7/22/44 instead of 9/26/52). Less effective in ranging markets due to its trend-following nature. Excellent for defining risk levels.

Commonly read alongside

RSI: Price breaks out of cloud + RSI > 50 = strong trend initiation signal
Volume: Cloud breakout with volume spike = high-conviction move
MACD: Both Ichimoku and MACD bullish simultaneously = very strong signal

Known limitations

The many components can cause analysis paralysis — focus on cloud position first
Lag: the cloud is based on past data projected forward; it can provide late signals
Default 9/26/52 periods were designed for daily charts — need adjustment on intraday

In practice

The system's central convention is to read signals only in the direction price sits relative to the cloud
The strongest bullish configuration is price above the cloud, a bullish TK cross, and Chikou above price
The Kijun-sen is commonly used as a dynamic reference level for exits in trending conditions
On markets that trade continuously, adjusted periods such as 10/30/60 or 7/22/44 are sometimes substituted for the traditional settings

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.