Journal of Technical Analysis - Market Technicians Association

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The position of the market relative to the cloud confirms the trend: uptrend if prices are above the cloud, downtrend if they are below the cloud. Some of the cloud
attributes further qualify the strength of support/resistance. For example, if the market is above a rising cloud, the current uptrend has a better chance to continue.
(see figure 4)
Figure 4: Crude oil, February 2008 contract. The rising cloud brought support to the market during the corrective
decline. Note also the Kijun Sen/Tenkan Sen crossover marked (1).
If the market is under a declining cloud, the current downtrend has a better chance to continue.
A very thin area in the cloud is a point of vulnerability of the current trend: with both lines close to each other, only a small move will be needed for the market
to cross the cloud. (see figure 5)
Figure 5: Natural Gas, February 2008 contract. The points marked (1) are areas where the cloud is very thin.
The position of the Kijun Sen/Tenkan Sen crossover (see figure 1) relative to the cloud is significant. For example, a bearish crossover is a weak signal if it
happens above the cloud (i.e. above significant support), normal if it happens inside the cloud, and strong if it happens below the cloud (see figure 6). The latter can
be interpreted as an attempt to capture resumptions of the major trend, after short-term counter-trend corrective moves (and vice versa for buy signals).
Figure 6: Crude oil, February 2008 contract. The first Kijun Sen/Tenkan Sen crossover is above the cloud, which
is a weak sell-signal. The second crossover is right on the upper cloud line, making it normal/strong.
Jo u r n a l of Technical Analysis • 2008 • Issue 65