Ichimoku - How do I interpret price breaking the Conversion Line AND the Base Line?

dbmclen

QQ: (Quick Question)
Please refer to the attached image showing the Ichimoku indicator. Sorry, but I have read DOZENS of pages today in an attempt to answer my question: "Am I in trouble with this stock?"

I've tried to determine if the PRICE crossing BELOW the Base Line is a sign to exit the trade?
[1] The Conversion Line has *NOT* crossed below the Base Line
[2] The Cloud is red
[3] The Lagging Line *IS* above the (green) cloud, but *NOT* above the price

Thank you for your time on my query! I'm sure you get ZILLIONS of "beginner" questions every day! I'd be HAPPY to pay for a GOOD answer!

Regards,

Bruce

markd

I don't use ichimoku, so grain of salt.

Hopefully, you have a plan.

If ichimoku has rules for entries and exits, and you followed the rules for your entry, then follow the rule for your exit.

If you didn't follow the rules for entry, then exit because you don't have a plan. Trading without a plan is gambling. Sometimes you will win, but given emotional biases common to everyone, most of the time you will lose.

That said, the sample shows no clear trend, although there is an upward bias of rising highs, and a rally off the lower low (just past the middle of the chart), so bulls are defending the lows and making new highs. Sellers on the other hand are limiting the breakouts. Like most indicators, ichimoku doesn't handle ranges very well, so I wouldn't take any signals until after a clear trend emerges. So far at least, it looks like bulls will win. To do that, they need to make a bottom between here and 6.5 and then a high above 11.

If you want to play that possible up leg, you might want to step down a time frame - e.g. if this is a daily chart, look at an hourly chart and apply ichimoku rules there.

Also, for your trading bias (are you bullish or bearish longer term) you could step up a time frame - so, if this is a daily chart, look at a weekly chart and apply ichimoku there.

Usually, the lower time frame will conform to the longer term trend - i.e. if the trend is up longer term and there is a bearish event in the shorter term - e.g. a lower low in a longer term up trend - that event is usually an entry.

On the other hand, a change of trend will show up first on the shorter term trend - e.g. the longer term trend is up, but the shorter term cannot make a new high after making a new low - that's a warning the trend is weak. Usually trends turn after a lot of back and forth - like the first higher low, and the first higher high on your chart. In those cases, the shorter term will give some early signals. But sometimes the trend turns on a dime - e.g. the first low on your chart, and the last high. The lower time frame will show the panic first.