Scanning Ichimoku Clouds

Scanning Ichimoku Clouds

While the Ichimoku Cloud indicator appears pretty complicated on the chart, the analysis is fairly simple. Comparisons of the various Ichimoku lines can be used in your scans to determine the overall trend and discover specific bullish or bearish crossover signals. If you're not familiar with all the Ichimoku lines, what they mean, and how they are calculated, learn more in our ChartSchool article on Ichimoku Clouds.

Ichimoku Scan Clauses

Ichimoku Lines

You can find the following Ichimoku lines in the Technical Indicators dropdown menu of the Advanced Scan Workbench:

  • Ichimoku Conversion Line: this is the 9-period Conversion Line (Tenkan-sen), the fastest and most sensitive Ichimoku line
  • Ichimoku Base Line: this is the 26-period Base Line (Kijun-sen), which is slower than the Conversion Line
  • Ichimoku Span A: this is the Leading Span A (Senkou Span A), which is calculated from the Base and Conversion Lines, and is the faster of the two leading span lines
  • Ichimoku Span B: this is the 52-period Leading Span B (Senkou Span B), the slower of the two leading span lines

We don't offer scanning for the Lagging Span (Chikou Span). Since it is plotted 26 days in the past and has no effect on current prices, it holds little value for scans.

You can also select Ichimoku Cloud Top or Ichimoku Cloud Bottom from the Technical Indicators dropdown menu. Ichimoku Cloud Top represents whichever leading span line (Span A or Span B) is at the top of the cloud; Ichimoku Cloud Bottom represents the span line at the bottom of the cloud.

Learn more about writing these Ichimoku Line scan clauses in our Scan Syntax Reference.

Ichimoku Patterns

There are also a few commonly-used Ichimoku patterns available from the Candlestick Patterns dropdown menu in the Advanced Scan Workbench:

  • In Ichimoku Cloud: this pattern indicates that prices are in the cloud (between the two leading span lines)
  • Above Ichimoku Cloud: this pattern indicates that prices are above the cloud (above both leading span lines)
  • Below Ichimoku Cloud: this pattern indicates that prices are below the cloud (below both leading span lines)
  • Green Ichimoku Cloud: this pattern indicates that the cloud is green (that Leading Span A is above Leading Span B)
  • Red Ichimoku Cloud: this pattern indicates that the cloud is red (that Leading Span A is below Leading Span B)

These Ichimoku patterns are often used on their own to check for trends. They are also sometimes used as crossover signals. To scan for a crossover signal, you would use two clauses: one to check that the pattern was not true yesterday, and another to check that it is true today. For example:

[yesterday's Above Ichimoku Cloud is false] 
and [today's Above Ichimoku Cloud is true]

Learn more about writing these Ichimoku Pattern scan clauses in our Scan Syntax Reference.

Ichimoku Time Offsets

One of the interesting aspects of the Ichimoku cloud indicator is that some of the indicator lines are plotted in either the future or the past. The Leading Span A and B lines, which form the “cloud”, are plotted on the chart 26 days in the future.

So what does it mean if we do a scan for Ichimoku Leading Span A or B values “today”? Let's look at a July 3rd SharpChart with Ichimoku Clouds added:

In this example, the values for the Leading Span A and Leading Span B lines (which define the cloud) that are displayed inline with the July 3rd price data are actually from May 25th, plotted 26 days in the future. The July 3rd values for the same lines are plotted at the far right edge of the chart, in early August.

If we run a scan on July 3rd, it doesn't make sense to scan for the July 3rd cloud values (Leading Span A and B), because they are plotted 26 days in the future, and we don't yet have any price data for August 9th to compare with them.

Instead, the Scan Engine uses the cloud values that are inline with the July 3rd price data: in other words, the Leading Span A and B lines for May 25th. On July 3rd, the Leading Span A and B line values are 97.18 and 91.25 respectively, but the Scan Engine uses the values from May 25th, which are 90.33 and 89.32.

This can become a bit mind-bending, but rest assured that the Scan Engine is using the Ichimoku Cloud values that are displayed on the chart inline with “today” whenever you run a scan.

Ichimoku Scan Example

Let's look at an example Ichimoku scan, which finds stocks producing a bullish crossover signal in an uptrend:

[type is stock]
and [Green Ichimoku Cloud is true]
and [Above Ichimoku Cloud is true]
and [Ichimoku Conversion Line(9,26,52) x Ichimoku Base Line(9,26,52)]

The first clause just sets the scan universe, limiting scan results to stocks. You will want to replace this with your own universe-defining clauses.

The second clause requires the Ichimoku Cloud to be green, meaning that the Leading Span A line is above Leading Span B (a bullish condition). Remember, it's using the Leading Span A and B line values from 26 days ago to determine if the cloud is green “today”.

The third clause requires that prices be above the Ichimoku Cloud (above both Leading Span A and Leading Span B lines). Again, it's using the cloud values from 26 days ago, checking to see if today's prices are above “today's” cloud. Just like the green cloud in the second clause, having prices above the cloud is a bullish condition, indicating that the larger trend is up.

The fourth clause requires the faster Ichimoku Conversion Line to cross above the slower Ichimoku Base Line, which is a bullish crossover signal. Note that these two lines are not plotted in the future, so today's values are used by the Scan Engine for this clause.

Conclusions

It can take some time to wrap your head around the time offsets used in Ichimoku charts, and how those offsets might affect your Ichimoku scans. Once you do, however, scanning the clouds (the Ichimoku clouds) is an easy way to find stocks displaying clear bullish or bearish signals.