If you have gotten the stock back in end 2008 or early 2009, you will have ride it to the top at around $17 from somewhere between $3 or $6.

Here’s one for the bearish trade. Do note that it is used for trend trading.

1. If we have went long back in 2009, the best time to get out is around Oct 23 or Oct 26 when the Tenkan sen cuts the Kijun sen to give a bearish cross.

2. The price also went down very fast with the kumo providing very little support.

3. Palm stage a rebound and tried to break through the kumo from Jan 4 to Jan 19.

4. There is a weak bullish cross around Jan 8 at $10.98 and if you tried to do a bullish trade it will ride you to the top at around $13.56 before it turns.

5. The key point to note here is how it hit the kumo and reverse; a very strong signal that there is no catalyst to push it forward.

6. For trend traders, a bearish Tenkan sen – Kijun sen cross will have been seen on Jan 29. In this case, we can see how with a weak trend, the trade will not be profitable if you wait till the bearish cross is confirmed.

7. A better way is to start taking profit when it dip below the Tenkan sen on Jan 22. Assuming an entry price of $11.04 on Jan 8, and an exit price of 12.50 on Jan 22, the profit will be around $1.46 per share.

8. Noticed how the price never went above the Tenkan sen after that? In fact, assuming we enter a short trade when the bearish cross is seen on Jan 29 at around $10.98 till now, Feb 24, … the closing price is $8.40. That represents a profit of $2.58 per share.

Note (Reminder) :

- No long entry if price is not above Tenkan sen (for short term trades)

- No long term entry if there is no confirmation from Tenkan sen and Kijun sen (long term trend trading)

Hi
Do you use the 80/ 20 system on the stochs.? Can the Ichimoku system be used for short sales?

The answer is YES.

Shorting stocks is not specified Ichimoku. We can use other TA indicators to do that as well.

However, I like Ichimoku best simply because it allow me to do so ‘with a glance’ ( hence, the term technical analysis at a glance).

Let’s go through a counter that I am fairly familiar with. PALM (from a chart point of view).

Ichimoku Chart 1 (April 2007)

The first sign of a  bearish outlook is when it gap up on March 20, 2007. This is follow by a very quick gap down 2 days later. (<< Look at thepink highlighted area). If a stock can gap up and gap down in such a short period that is already the first sign of trouble. Also, look at the volume.

However, at that point, we can’t confirm if the uptrend is broken or not. But, I will definitely reduce my stake if I have a long position.

On April 9, we have a confirmation that the uptrend is broken. We can see from the 2 yellow highlighted areas.

- The left shows the Chikou Span (green line) about to cut through the price level.

- The right shows the Tenkan sen cutting through the Kijun sen downwards.

Putting the above 2 together, give us an indication that a bearish trend is on the way. At this point, we will need to monitor the kumo support at 16.40

Ichimoku Chart 2

By May 7, 2007, PALM’s price has drift further downwards and has break through the kumo support. This is the last support level that I will hold on to for any long position.

Ichimoku Chart 3

Between the first breakdown in April and Oct, we can see that there is some counter trend rallies, but by end Oct 2007, the stock price break down and PALM’s price sank all the way to about $5 or lower

So, as can be seen, on the Ichimoky chart, the kumo acts as the ultimate final support level if we are looking for short positions. A Tenkan sen – Kijun sen cross is not sufficient at times as there are still support below; hence the need to view the bearish cross in reference with where the kumo is.

I will be interested to hear from fellow traders and/or investors, how they would have trade PALM for the period above.

Thanks

The comment was on the use of Chikou Span and the use of the current price level against it.

at ichiwiki, the chikou was used against the price 26 days ago.

but you are using the chikou against the current price?

So, when do we use Chikou Span against historic price and when do we use it against the current price. I believe, the above is my mistake of not highlighting the scenario better. Or it could also be a case of me not explaining it well enough.

Let’s illustrate it with a series of charts.

In this case, I will use a recent trade that I have on RedHat (RHT).

RedHat at 28 August.

• Chikou Span have not cut above the price level at 26 periods back
• From the Chikou Span, I can also see that there is a resistant level at 23.26

So, what does this means?

To me, it means that even if Chikou Span cuts the historic price highlighted by the yellow circle, it will still not be a bullish signal. I would want to see it break above 23.26 as well.

On top of that, we can see from the chart that Tenkan sen have not cut Kijun sen yet. So, not all bullish signals are in place.

Let’s move the date forward on the chart.

RedHat at 1 Sept.

Tenkan sen has cut Kijun sen. But, if we look at Chikou Span, it is pointing down now and has not cut above the historic price yet.

We can also see from the Chikou Span that there is now another immediate resistant level at 22.96

With this, we have 2 resistant levels to break. Personally, when I see 2 resistant levels that is so close, I will want the price level to clear both hurdles before taking a position.

In this case, I see 23.26 as the level to clear.

Let’s move forward on the chart again.

RedHat as of 4 Sept.

As we can see from the chart below, we have bullish confirmation on the following indicators:

• Chikou Span has break through historic price level and punch through the 2 resistance levels
• Tekan sen has also cut Kijun sen with both lines pointing up. These are bullish signals.

So, as can be seen when I say ‘Chikou Span cuts the current price level’, it should perhaps be ‘Chikou Span cuts the cuts the immediate resistant levels instead’. Perhaps, that may be clearer.

Just noticed this week that Stockcharts’ weekly plot for Netflix (NFLX) had a problem with the Kijun line (not verified if the problem extends to all other lines – I’d believe so, if they used the same formula).

In comparing the Stockcharts plot with those in ThinkOrSwim, ChartNexus and FreeStockCharts, I find that the Stockcharts plot seems to be a week slow. In other words, while the rest of the systems show an uptick in the latest Kijun line, Stockcharts still shows it as flat.

So I’m trying to recalibrate my understanding here:

My understanding is that, in plotting the Tenkan/Kijun lines, we should start counting the 9 or 26 periods starting with the latest closed session. Am I right? It appears to me Stockcharts plot for NFLX (not sure if it extends to others, I’d think so though) started counting from the session before the latest session and hence was 1 session late.

I’ve sent a query to Stockcharts support on this, but would like to see if I stand to be corrected for the period counts. If Stockcharts is right with the counts, then everyone else is wrong, and vice versa. So

The key point here, it seems that StockChart is plotting the Tenkan sen one period later.

You can see here (example provided by GR) that AMZN Tenkan sen is flattening.

And here’s one from Thinkorswim (TOS).

What is the implications of this?

If StockCharts is wrong, then relying on StockCharts Weekly Chart or Monthly charts can set you back by one week or even one month. In other words, you are receiving the signal one week later than others.

But, if StockCharts is correct, that means others like Thinkorswim or Chartnexus are wrong.