Ichimoku Kinko Hyo Indicator
Ichimoku Kinko Hyo is a Japanese charting technique that was created before by a Japanese newspaper writer, with the pen name of Ichimoku Sanjin.
- Ichimoku means 'a glance' or 'one look'
- Kinko means 'equilibrium' or 'balance'
- Hyo is the Japanese word for "chart"
Thus, Ichimoku Kinko Hyo means, 'a glance at an equilibrium chart'. Ichimoku attempts to identify the likely direction of crude oil price & help the trader to determine the most suitable time to enter or exit the oil market.
Calculation
This technical indicator consists of five lines drawn using the midpoints of previous highs & lows. The five lines are calculated as follows:
1) Tenkan-Sen: Conversion Line: Red Line (Highest High + Lowest Low) / 2, for the last 9 crude oil price periods
2) Kijun-Sen: Base Line: Blue Line (Highest High + Lowest Low) / 2, for the last 26 crude oil price periods
3) Chikou Span: Lagging Span: Green Line Today's closing crude oil price drawn 26 crude oil price periods behind
4) Senkou Span A: Leading Span A = (Tenkan Sen + Kijun Sen) / 2, plotted 26 crude oil price periods ahead
5) Senkou Span B: Leading Span B: (Highest High + Lowest Low) / 2, for the past 52 crude oil price periods, drawn 26 crude oil price periods ahead
Kumo: Cloud: area between Senkou Span A & B
Oil Trading Technical Analysis & How to Generate Trading Signals
Bullish signal - Tenkan-Sen crosses the Kijun-Sen from below.
Bearish signal - Tenkan-Sen crosses Kijun-Sen from above.
However, there are different levels of strength for the buy and sell oil signals generated.
Technical Analysis in Oil Trading
Bullish crossover trading signal forms above the Kumo (clouds),
Very strong buy oil signal.
Bearish cross-over trading signal forms below the Kumo (clouds),
Very strong sell oil signal.
If a bullish/ bearish crossover trading signal takes place within the Kumo (clouds) it's considered a medium strength buy or sell oil signal.
A bullish crossover that occurs below the clouds is considered a weak buy oil signal while a bearish crossover that occurs above the clouds is considered a weak sell oil signal.
Support & Resistance Levels
Support & resistance levels can be predicted by the presence of Kumo (clouds). Kumo can also be used to identify the current oil trend of the oil market.
- If crude oil price is above the Kumo, the prevailing market oil trend is said to be upwards.
- If crude oil price is below the Kumo, the prevailing market oil trend is said to be downwards.
Chikou Span or Lagging Span is also used to determine the strength of the buy or sell oil signal.
- If the Chikou Span is below the closing crude oil price of the last 26 periods ago and a sell short signal is given, then the strength of the oil trend is downwards, otherwise the signal is considered to be a weak sell oil signal.
- If there is a bullish signal and the Chikou Span is above the crude oil price of the last 26 periods ago, then the strength of the oil trend is to the upside, otherwise it is considered to be a weak buy oil signal.
