Ichimoku Cloud
A Japanese all-in-one indicator that simultaneously displays trend direction, momentum, and forward-projected support and resistance in a single chart overlay.
Definition
The Ichimoku Cloud (formally Ichimoku Kinko Hyo, meaning "one glance equilibrium chart") is a comprehensive technical indicator developed by Japanese journalist Goichi Hosoda in the 1960s. Unlike single-line indicators, it plots five components simultaneously: the Tenkan-sen (conversion line), Kijun-sen (base line), Senkou Span A and B (which form the shaded cloud or Kumo), and the Chikou Span (lagging span). Together these components convey trend direction, momentum, and dynamic support and resistance zones across both past and future price space. The cloud itself is projected 26 periods into the future, giving traders a unique forward-looking dimension absent from most indicators.
Why it matters
Indian positional and swing traders on NSE and BSE prize the Ichimoku Cloud because it consolidates what would otherwise require several separate indicators into one clean view. During trending markets — common in Indian large-caps and index futures when FII flows are strongly directional — the cloud provides clear dynamic support and resistance levels, removing ambiguity about where to place stops. For derivatives traders, a thick, wide cloud signals strong support or resistance that a straddle or strangle seller may exploit as a range-bound buffer. Conversely, a thin cloud indicates a weaker zone where price could break through with relatively little momentum, caution for option writers. Daily and weekly Ichimoku readings are particularly relevant for positional trades in Nifty 50 and Bank Nifty futures.
How it works
The five components use the following default periods (9, 26, 52):
Tenkan-sen = (9-period high + 9-period low) ÷ 2
Kijun-sen = (26-period high + 26-period low) ÷ 2
Senkou Span A = (Tenkan-sen + Kijun-sen) ÷ 2, plotted 26 periods ahead
Senkou Span B = (52-period high + 52-period low) ÷ 2, plotted 26 periods ahead
Chikou Span = Current closing price, plotted 26 periods back
The cloud (Kumo) is the shaded area between Senkou Span A and B. Price above a green cloud is bullish; below a red cloud is bearish. The Tenkan-sen crossing above the Kijun-sen while price is above the cloud is a classic buy signal. The Chikou Span above the price from 26 periods ago confirms upward momentum.
Example
Suppose Infosys on the NSE is trading at a hypothetical ₹1,650 on the daily chart. The Ichimoku Cloud shows the Kumo is green between ₹1,580 and ₹1,610, price is above the cloud, the Tenkan-sen (₹1,640) is above the Kijun-sen (₹1,620), and the Chikou Span is above the price candles from 26 sessions ago. All five components align bullishly — a high-conviction setup. A positional trader might enter a long position with the cloud top at ₹1,610 as the stop-loss reference, targeting the next projected resistance from a prior swing high. This is a hypothetical illustration; real trades must account for news, volume, and broader index direction.
Combine Ichimoku with options flow
Pair Ichimoku Cloud signals with TradePulse's live open interest data to identify where institutional money aligns with the technical picture.