Introduction – How to Use Ichimoku to Find Sector Rotation

Outline

Module 1 – 2010-2011 Sector Rotation
Module 2 – 2012-2015 Sector Rotation
Module 3 – 2016-2019 Sector Rotation

Here is some basic information about Ichimoku Kinkō Hyō. 

Ichimoku is an indicator system used to evaluate market conditions on stock charts. It’s also useful for comparing one or more charts to each other. That is how we use it for evaluating market rotation. 

At the core of the Ichimoku indicator system, is a Cloud formation that is based on calculations of past market action. The Cloud formation is a shaded area between two indicator lines. 

The first Cloud line, which is called Senkou Span A uses market numbers from two moving mid-point calculations. One looking back 9 periods and the other looking back 26 periods. 

Moving Mid-Point Calculations
(highest high + lowest low)/2 for the last 9 periods (This line is called the Tenkan-sen)
(highest high + lowest low)/2 for the last 26 periods (This line is called the Kijun-sen)

Senkou Span A takes the results of these two calculations, divides them by two, then projects it forward 26 periods.
Senkou Span A = ( (Tenkan Sen + Kijun Sen)/2 ) then plot forward 26 periods

The second line that makes up the Cloud looks back 52 periods.
Senkou Span B = ( (Highest High in 52 periods + Lowest Low in 52 periods)/2 ) plot forward 26 periods

These calculations are discussed in depth in Course 02 – Learn Ichimoku – Learn How the Ichimoku Kinkō Hyō Cloud System Works – Stock Weather.
Module 2 – How to Use Ichimoku’s Tenkan-Sen – the Wind in the Weather System
Module 3 – How to Use Ichimoku’s Kijun-Sen – the Jet Stream
Module 4 – The Importance of the Chikou Span – Shadow Line
Module 5 – The Kumo Cloud – What is Ichimoku’s Cloud Indicator?

The “Cloud” is also called the Kumo.

It’s this Kumo Cloud formation that sets Ichimoku apart from other indicator systems.

In reviewing market rotation through the different sectors, we first look at the future Kumo Cloud to determine which sectors have bullish green Clouds and which sectors have bearish red Clouds. We also look for thinning or thickening clouds as well as how these compare between the different sectors.

Next, if the Clouds are similar, we look at the Kijun-sen and Tenkan-sen for clues to which sector is leading and which is lagging.

Course Objectives

By the end of this course, you’ll be able to:

  • assess Ichimoku’s future Cloud on a chart to see if it’s getting bigger or smaller
  • determine if money is flowing into or out of individual sectors
  • evaluate the difference between money flow between nine different sectors
  • estimate the leading sector
  • figure out the lagging sectors
  • rank the different sectors in order of money flow
  • watch for weakness as trends change using the future Kumo

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