Thomas Wood | MicroQuant Identifying Key Support and ...Value... · Ichimoku ValueCloud . Risk...

Identifying Key Support and

Resistance Levels

presented by

Thomas Wood | MicroQuantSM

Ichimoku ValueCloud

Risk Disclaimer

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CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

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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


• Father of Candlestick charts, Munehisa

Honma

Ichimoku ValueCloud


• 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


• 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


• Sasaki, Nikko Citigroup Securities – 1996

– Ichimoku Kinko Studies, 18th edition

Ichimoku ValueCloud


• 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


(Hanging Man)

#3 Reversal down

• Medium lower wick

• Small body is at the top

• Body should be bearish

(close below open)

Ichimoku ValueCloud


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


(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


(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


(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


(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

http://www.etfdb.com/


(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


(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


(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



Special Exclusive Members Webinar Price

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Special Exclusive Members Only Webinar Price

$197





Exclusive Member Price - $197



Special Exclusive Members Only Webinar Price

$197



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.


(Momentum Move)

• Easiest to see… 20-25 bar move

• Harder… 25+bar “grinding” move

Divergence Trading


(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?


divergence pattern


(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


divergence pattern


(Stop Loss)

- Easy…

• Above the double/triple top high price

• Below the double/triple bottom low price

Divergence Trading

Divergence Trading


divergence pattern


(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


divergence pattern


(Profit Targets)

• ValueCharts/ValueBars : Yellow -> Yellow

• Neckline

• Fibonacci 50% & 61.8% retracements

• “Runner” for new opposite trend

Divergence Trading

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


Is Divergence Pattern at Support/Resistance

level?

Identify Stop Loss levels – where is the

Divergence “broken” and no longer valid

Divergence Trading


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

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


• Utilize the 15, 30, or 60 minute chart

• Daily, Weekly support & resistance levels

– look for divergences

Divergence Trading


• 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

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 ***

Thomas Wood | MicroQuant Identifying Key Support and ...Value... · Ichimoku ValueCloud . Risk...

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