Looking at the chart above we are doing our top down analysis to find a trade on the 4 hour time frame. Therefore we start with this daily time frame to get the market sentiment. The things that we will take notice is:
1. Price vs Kumo:
Price is inside the Kumo therefore it is considered turbulance, but price is right at the bottom of this daily Kumo. This is a strong support level and also the final Ichimoku support level for price before we have a Kumo breakout. We need price to break this level and close below this level and that will be a bearish market and a signal for us to enter the market.
2. Chikou vs price:
The Chikou Span is below the price which is our next bearish signal. Chikou Span has nothing to inhibit its's path and once price breaks the Kumo we should have clear sailing on the down side.
3. Tenkan vs Kijun:
We had a Weak Bearish TK Cross happen above the cloud which is a bearish signal but weak considering it happened in bullish territory above the Kumo. Since were not trading the TK Cross we are only concerned with the bearish signal.
4. Kumo Future:
Looking at the chart we barely have the Bearish Kumo Twist but if price breaks the Kumo and closes below that would give us the final bearish signal that we need to enter the market.
One other thing to take notice of is that the Kumo bottom is also a 50% retracement level of the move from 76.012 to 84.165. This level could be a strong support level and push the market back up.
Now let's look at the 4 Hour Time Frame chart below where we will be looking to enter the trade.
On the 4 Hour chart above take notice of the light blue line. This is the Daily Kijun level and a strong support level as mentioned so we need the close below this level. I have an entry order set a few pips below this level and the trade will be opened once that level is breached. I set my stop loss above the 3rd previous candle. Once the light blue line level is broken with the trade open then that level will become a resistance level and keeping the market below my stop loss supposedly! With the Ichimoku rules we could have set a stop loss at the lime green Tenkan level, the dark blue Kijun level or finally the bottom of the Kumo.
I am using the Average Daily Range but on the weekly range rather than the daily and I have profit target set at the projected level of 78.77. I can monitor my trade and move the stop loss and profit levels accordingly. Also we could use Ichimoku rules for profit targets and close the trade if price closes above the lime green Tenkan or the dark blue Kijun or finally a bullish TK Cross.
Now I'll sit back and wait for the market to come to my level and BOOM! I'll take the trade. Ok traders hopefully this is of value and until next time God bless!