What is Ichimoku Analysis?

One of the many technical indicators that analysts use to study the movement of prices in the stock market is this ICHIMOKU ANALYSIS.

As you rightly guessed, Ichimoku is a Japanese term that means "one look".  This Ichimoku analysis  is used to gauge momentum along with future areas of support and resistance. The Ichimoku indicator is comprised of five lines called the tenkan-sen, kijun-sen, senkou span A, senkou span B and chickou span. This indicator was developed so that a trader can gauge an asset's trend, momentum and support and resistance points without the need of any other technical indicator.

This charting technique was created by a Japanese newspaper writer. It does look very complicated when a trader sees the indicator for the first time, but don't hesitate to give this indicator a try because the complexity quickly disappears once you gain an understanding of what the various lines mean and why they are used.

The five components of this interesting indicator are described hereunder:

Tenkan-sen (Conversion Line): (9-period high + 9-period low)/2))
The default setting is 9 periods and can be adjusted. On a daily
chart, this line is the mid point of the 9 day high-low range,
which is almost two weeks. 

Kijun-sen (Base Line): (26-period high + 26-period low)/2))
The default setting is 26 periods and can be adjusted. On a daily
chart, this line is the mid point of the 26 day high-low range,
which is almost one month). 

Senkou Span A (Leading Span A): (Conversion Line + Base Line)/2))
This is the midpoint between the Conversion Line and the Base Line.
The Leading Span A forms one of the two Cloud boundaries. It is
referred to as "Leading" because it is plotted 26 periods in the future
and forms the faster Cloud boundary.

Senkou Span B (Leading Span B): (52-period high + 52-period low)/2))
On the daily chart, this line is the mid point of the 52 day high-low range,
which is a little less than 3 months. The default calculation setting is
52 periods, but can be adjusted. This value is plotted 26 periods in the future
and forms the slower Cloud boundary.

Chikou Span (Lagging Span): Close plotted 26 days in the past
The default setting is 26 periods, but can be adjusted.