thomas wood | microquant identifying key support and ...value... · ichimoku valuecloud . risk...
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Identifying Key Support and
Resistance Levels
presented by
Thomas Wood | MicroQuantSM
Ichimoku ValueCloud
Risk Disclaimer
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About Me… Dave Aquino
• 1995 Graduate of Vanderbilt University
• Full Broker at 23 with Merrill Lynch
• 12 Year Senior Advisor Vanguard Asset Management Service
• Going on 4+ years in Stocks & Options Live Trading Room
• Ichimoku Kinko Hyo History
• Understanding the Cloud / Reading the
Cloud
• High Probability ValueCandlesticks
Ichimoku ValueCloud
• 3 Consistent Value Candlesticks +
Ichimoku Trades
• 3 Major Ichimoku ValueCloud Trading
Opportunities
Ichimoku ValueCloud
Ichimoku Kinko Hyo History
Ichimoku Kinko Hyo…
• Ichimoku = “at a glance”
• Kinko = “balanced”
• Hyo = “bar chart”
Ichimoku ValueCloud
Ichimoku Kinko Hyo history…
• Edo Period of medieval Japan 1700-1860
• Rise of the Merchant Class / Dojma Rice
Exchange - Osaka
Ichimoku ValueCloud
Dojma Rice Exchange - Osaka
Ichimoku ValueCloud
Ichimoku Kinko Hyo history…
• Father of Candlestick charts, Munehisa
Honma
Ichimoku ValueCloud
Ichimoku Kinko Hyo history…
• Munehisa Homma was a rice merchant from Sakata, Japan who traded in the Dojima Rice market in Osaka during the Tokugawa Shogunate.
• Rules for Successful Trading
• Longest winning streak, over 100 in a row
Ichimoku ValueCloud
Ichimoku Kinko Hyo history…
• 1940, Goichi Hosada added MA to Candlesticks
• So dedicated to the task before him (his wife divorced him, citing irreconcilable differences rooted in her raging jealousy of the numbers 9, 26 and 52),
• Goichi-san and his cadre of human calculators spent over 20 years crunching numbers.
• Finally in 1968, Hosoda published his findings: a system he naturally titled Ichimoku Kinko Hyo.
Ichimoku ValueCloud
Ichimoku Kinko Hyo history…
• Sasaki, Nikko Citigroup Securities – 1996
– Ichimoku Kinko Studies, 18th edition
Ichimoku ValueCloud
Ichimoku Kinko Hyo history…
• Enter any modern Japanese Trading
Room, most common charts you’ll see will
have Ichimoku Kinko Clouds
Ichimoku ValueCloud
Understanding the Cloud
– Reading the Cloud -
Ichimoku Clouds…
• Mid-point Prices are used
• Candlesticks with Moving Averages
– Present trend, current Support & Resistance
– Future trend 26 periods into future
– Confirmation of trend after 26 periods
Ichimoku ValueCloud
Tenkan (Conversion Line)
• 9 Day Mid-Point Moving Average
• Most active moving MA line
– Current representation of current fair value
average
• Similar to 8 period EMA
Ichimoku ValueCloud
Kijun (Base Line)
• 26 Day Mid-Point Moving Average
• Moves more slowly, smooth average
• Greater importance for Support &
Resistance
Ichimoku ValueCloud
The Conversion Line & Base Line
• Actively create Support & Resistance
levels at their current prices
• They also act like traditional western-
charting Moving Averages, crosses up &
down can be read as changes in trend
Ichimoku ValueCloud
Drawing the Cloud…
• Cloud Span A (Faster)
– Sum of 9-Day (Conversion) & 26-Day (Base) moving averages / 2 projected forward 26 days
• Cloud Span B (Slower)
– Mid-Point of the highest high, lowest low over the last 52 days
Ichimoku ValueCloud
Chikou (Lagging line)
• Today’s Closing price, plotted 26 periods
behind
• Change in trend in Chikou is Lagging, but
considered the most important
confirmation of trend
Ichimoku ValueCloud
High Probability Value
Candlestick Patterns
Single Bar Reversal Patterns
(Golden Doji)
#1 Reversal pattern
• Ok to have red ends
• Body is all yellow
• Found at the end of multi-
bar move
• Center of 3 Bar reversals
Ichimoku ValueCloud
Single Bar Reversal
Patterns
(Shooting Star)
#2 Reversal down
• Long upper wick
• Small body is at the
bottom
• Body can be bullish
or bearish, bearish is
better
Ichimoku ValueCloud
Single Bar Reversal Patterns
(Hanging Man)
#3 Reversal down
• Medium lower wick
• Small body is at the top
• Body should be bearish
(close below open)
Ichimoku ValueCloud
Single Bar Reversal Patterns
Long Handled Hammer
#1 Bullish Reversal
Mirror of Shooting star
• Long lower wick
• Small body is at the top
• Body can be bullish or
bearish, bullish is better
Ichimoku ValueCloud
Single Bar Reversal
Patterns
(Long-Legged Doji)
– neutral, wait & see
• Lower & Upper wick
• Small body is
generally very small
Ichimoku ValueCloud
2 Bar Reversal Patterns
(Bullish Engulfing)
- Double ended value
Ichimoku ValueCloud
2 Bar Reversal Patterns
(Bearish Engulfing)
• - Double ended value
Ichimoku ValueCloud
Ichimoku ValueCloud
3 Bar Reversal
Patterns
(Evening Star),
SUN HAS SET
on this bull
Long Bullish
Golden Doji
Long Bearish
Ichimoku ValueCloud
3 Bar Reversal Patterns
(Morning Star) – RISE
and shine, looking up
Bearish
Golden Doji or Long
Handled Hammer
Long Bullish
Ichimoku ValueCloud
Ichimoku ValueCloud
3 Consistent ValueCandles + Ichimoku
Cloud Trades
ValueCandles + Ichimoku Trades
(Cloud Emerging)
- On 60 minute charts
- Move same direction with momentum
- 3 bar close outside cloud = confirmation
- TIP: Look for last kiss or continuation flag
on 15 minute chart
Ichimoku ValueCloud
Ichimoku ValueCloud
ValueCandles + Ichimoku Trades
(Cloud Bounce)
- Reversal Pattern on Spans A & B
- Particularly when price enters the Cloud
and reverse bounces at the opposite side
Span
- TIP: Look for reversal pattern on 1/3 size
TimeFrame
Ichimoku ValueCloud
Ichimoku ValueCloud
ValueCandles + Ichimoku Trades
(3 Bar Bounce Debit Spread)
- On 60 minute chart, After price “bounces” and reverses off the Opposite Span, and has 3 bar closes (away from span) above/below that point of inflection
- Sell an ATM debit spread : Buy the ATM strike (current price), Sell the strike at the Next Ichimoku S/R level
- Minimum 7 days out
- Go for 30-50% profit
Ichimoku ValueCloud
Ichimoku ValueCloud
3 Major Ichimoku ValueCloud Trading
Opportunities
Ichimoku ValueCloud Trading Opportunity
(Go with ETFs) : Primarily Trend Trades
- Commodities - GLD, GDX, USO,
- Currencies -
- Sectors – IBB, XLE
- Foreign Mkts – FXI, EWJ, EWZ
- Leveraged – SSO
- Inverse – SDS
- www.ETFdb.com - ETF resouce website
Ichimoku ValueCloud
Ichimoku ValueCloud Trading Opportunity
(Go with ETFs) : Primarily Trend Trades
- Trade primarily with Cloud Emerging &
Universal Trend Breakout strategy
- Indefinite holding period
- Cost Effective Diversification
- New Trading Room Focus
Ichimoku ValueCloud
Ichimoku ValueCloud
Ichimoku ValueCloud
Ichimoku ValueCloud Trading Opportunity
(Off-Calendar) Credit Spreads
- Trade primarily with Cloud Bounce
strategy
- Still on weekly calendar
- Early in week – momentum on daily +
strong 60 minute momentum : +/-30°slope
- Late week – follow 11-Hour strategy
Ichimoku ValueCloud
Ichimoku ValueCloud
Ichimoku ValueCloud Trading Opportunity
(Universal Trend Breakout)
- Conversion Line/Baseline Cross
- Aggressive : 60 minute chart, run 2-4 days
- Conservative : Daily chart, run 2-3 weeks
- 1. at the “cross” – establish price level
- 2. look for 3 closes above, beware last kiss
- Can be enhanced with Momentum Trender
Pro
Ichimoku ValueCloud
Ichimoku ValueCloud
Ichimoku ValueCloud Q&A
Thank you for your attendance!
Ichimoku ValueCloud
Remember…
Divergences are Everywhere!!
Ichimoku ValueCloud
Trend Trading / Support & Resistance
• Elegant way of identifying Present &
Future support & Resistance levels
- Combine with ValueBars/ValueCharts
- Highest probability Candlestick reversals
- Identify Optimum Support & Resistance
Ichimoku ValueCloud
Trend Trading / Support & Resistance
• Trade your favorite setups
– Multi-Day Trend Trades
– Identify Quality S&R for Reversals/Credit
Spreads
– Breakout Momentum Trades
– ETF Position Trades
Date: Wednesday, April 27th, 8PM est
Ichimoku ValueCloud Workshop $399
www.valuecharts.com/CLOUD
Ichimoku ValueCloud workshop
Date: Wednesday, April 27th, 8PM est
Ichimoku ValueCloud Workshop $399
Special Exclusive Members Webinar Price
???
www.valuecharts.com/CLOUD
Ichimoku ValueCloud workshop
Date: Wednesday, April 27th, 8PM est
Ichimoku ValueCloud Workshop $399
Special Exclusive Members Only Webinar Price
$197
www.valuecharts.com/CLOUD
Ichimoku ValueCloud workshop
Ichimoku ValueCloud workshop
www.valuecharts.com/CLOUD
Exclusive Member Price - $197
Date: Wednesday, April 27th, 8PM est
Ichimoku ValueCloud Workshop $399
Special Exclusive Members Only Webinar Price
$197
www.valuecharts.com/CLOUD
Ichimoku ValueCloud workshop
Date: Wednesday, April 27th, 8PM est
Ichimoku ValueCloud Workshop $399
Special Exclusive Members Only Webinar Price
$197
www.valuecharts.com/CLOUD
Ichimoku ValueCloud workshop
Divergence Trading
** Price chart & MQ momentum
Divergence Trading
** Price chart & MQ momentum
Fundamental Divergence Trade Setup
(Nice to have)
• 2nd momentum indicator – VBT, squeeze
Divergence Trading
Divergence Trading
*** Point out VBT, Higher 3x T.F., S.R from
Higher T.F.
Fundamental Divergence Trade Setup
(Momentum Move)
• Easiest to see… 20-25 bar move
• Harder… 25+bar “grinding” move
Divergence Trading
Fundamental Divergence Trade Setup
(Top/Bottom divergence pattern)
• Divergence in ~ 12 bars
• Harder… sideways, move, may not work
Divergence Trading
Divergence Trading
*** point out Momentum Move & T/B
divergence pattern
How many Divergences do you see?
*** point out Momentum Move & T/B
divergence pattern
Fundamental Divergence Trade Setup
(Boost chance of Success)
• VBT/squeeze is already “heading” in the
direction of the reversal
• The divergence is at a known
support/resistance level
Divergence Trading
Divergence Trading
*** point out Momentum Move & T/B
divergence pattern
Fundamental Divergence Trade Setup
(Stop Loss)
- Easy…
• Above the double/triple top high price
• Below the double/triple bottom low price
Divergence Trading
Divergence Trading
*** point out Momentum Move & T/B
divergence pattern
Divergence Trading
*** point out Momentum Move & T/B
divergence pattern
Fundamental Divergence Trade Setup
(Stop Loss)
Harder…
• When the “divergence” fails. When the
momentum regains strength of original
move, and it increases to the point of
having more strength than 1st high/low.
Divergence Trading
Divergence Trading
*** point out Momentum Move & T/B
divergence pattern
Fundamental Divergence Trade Setup
(Profit Targets)
• ValueCharts/ValueBars : Yellow -> Yellow
• Neckline
• Fibonacci 50% & 61.8% retracements
• “Runner” for new opposite trend
Divergence Trading
Divergence Trading
*** Profit Targets
Divergence Trading
*** Profit Targets
Divergence Trading
*** Profit Targets
Divergence Trading
*** Profit Targets
Divergence Trading
*** Profit Targets
Divergence Trade Checklist
Identify a Momentum move : 20-25 bars
Look for Top/Bottom Divergence Pattern 10-12
bars
Check VBT/squeeze – histogram moving in
direction of reversal
Divergence Trading
Divergence Trade Checklist
Is Divergence Pattern at Support/Resistance
level?
Identify Stop Loss levels – where is the
Divergence “broken” and no longer valid
Divergence Trading
Divergence Trade Checklist
Identify Profit Targets
1. ValueCharts/ValueBars : Yellow -> Yellow
2. Neckline
3. Fibonacci 50% & 61.8% retracement levels
4. “Runner” for new opposite trend
Divergence Trading
Divergence Trading
*** Bullish Divergence walkthrough
Divergence Trading
*** Bearish Divergence walkthrough
Intra-Day Divergences
Intra-Day Divergences – tick, 2, 3, 5, 10 min
• Range-bound trading days
– Use high/low price of first 30 minutes of
trading day.
– Look for divergences at these S/R levels
Divergence Trading
Divergence Trading
*** Range-bound : high/low first 30 minutes
Divergence Trading
*** Range-bound : high/low first 30 minutes
Intra-Day Divergences
• At support & resistance
– Previous days High/Low, look for divergences
Divergence Trading
Divergence Trading
*** Range-bound : previous day high/low
Swing Trading Divergences
Swing Trading Divergences
• Utilize the 15, 30, or 60 minute chart
• Daily, Weekly support & resistance levels
– look for divergences
Divergence Trading
Swing Trading Divergences
• Look for 3-4 day “runs” about 20-25 hourly
bars
• Watch for a 1.5-2 day about 10-12 hourly
bar turnarounds (divergence pattern)
Divergence Trading
Divergence Trading
*** Swing Trades on hourly chart
Divergence Trading
*** Swing Trades on hourly chart
Divergence Trading
*** Swing Trades on hourly chart
Want to master Divergences?
Mastery Practice
• 1-2 minute charts of Crude Oil futures (CL)
or Gold (GC)
• Practice watching for Momentum moves
20-25 bars
• Identify Divergence Pattern (8-12 bars)
Divergence Trading
Mastery Practice
• Actually write down entry point/price
• Execute your Profit Targets
• Identify your stop loss
• Did you make money?
Divergence Trading
Divergence Trading
*** Mastery Practice ***