Chiko Span

Chiko Span [Ichimoku Thread #8 🧵👇]

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1/15 Basics 🇯🇵Japanese name: Chiko Span [some people use Chikou] 🇬🇧🇺🇸🇨🇦🇦🇺English name: Lagging Span ➡️Meaning: Relation of the current price to the past support/resistance levels. "Live" time element of the chart. "Second" price - one 26 cycle in the past. 🧮 Formula: The current close price shifted 26 candles in the past 🧠 Hint: Although it's called Lagging Span in English, there is nothing lagging about CS. it's just as lagging as the current price, i.e. - it has zero lag. It's called this way as it goes behind the price on the chart. While all Ichimoku elements act in synchrony and everything is connected, it may be argued that from one point of view Chiko Span is the most important one. This is because it's the only element which can invalidate all the other four. ❌📈If CS is in the candles, no matter what the rest four lines show - there is no trend, but a range. On an uptrend, CS is above the candles, and on a downtrend - it is below them. Many people remove Chiko Span thinking that it's "noise" on the chart - and as far as I remember, when I was starting to use Ichimoku initially even I did that as well. Thankfully it didn't take long until I realized how essential it is and I started using it and learning more about it. You can't trade without Chiko Span - says Goichi Hosoda, the creator of Ichimoku - and I guess if we use Ichimoku we should listen to him. I think that Chiko Span is by a huge margin the simplest (in terms of formula) yet the most underrated Ichimoku element. Even using only CS, without the other four lines you can achieve jaw-dropping accuracy and many things which are impossible even with indicators with complex formulas. On the other side, the rest of the four lines, if used without Chiko Span do not provide the full picture and may give totally wrong impression. I will illustrate this with examples below.

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2/15 There are many unique things about Ichimoku which make it completely different from other TA systems. 👻One of them is that when you do TA using Ichimoku, you analyse two prices - one in the present, and its "ghost shadow" 26 candles in the past - which is Chiko Span. Normally, the indicators drawn on top of the chart as lines, with X amount of lines shows you X support/resistance levels. But thanks to the specifics of Chiko Span, with just five lines Ichimoku shows you 11 support/resistance levels in three time periods: past, present and future! In the past: Kijun Sen, Tenkan Sen, SSA, SSB and the past PA at CS. All past S/R levels exactly 26 periods back (at CS) have an impact on the present. In the present: Kijun Sen, Tenkan Sen, SSA and SSB. In the future: SSA and SSB.

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3/15 When you look at Chiko Span, always think of it as the price. If you see the price approaching a significant support/resistance level created from extensive past price action (or just a very HTF high or low) - would you assume that this is an obstacle? - of course yes. Then, if you see Chiko Spain doing the same, assume the same. But with Chiko Span it's even easier, because with the current price there is no candle just below or above it and you need to analyse the past PA to see which level is significant. 2⃣6⃣With Chiko Span, exactly the candle which is 26 candles in the past is the one that matters and you can extremely accurately use its lows and highs as accurate S/R levels. All past PA at Chiko Span is support/resistance. The same applies to all past Ichimoku S/R levels: the cloud, Kijun Sen and even Tenkan Sen all act as support/resistance at CS. To have a clear trend and to expect the price to move freely without obstacles, we want not only the current price to be beyond the last S/R level. We want the same for Chiko Span and we want it to have nothing in its way - just an open space.

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4/15 To illustrate how exactly the candle at Chiko Span acts as a specific support/resistance (with mind-blowing accuracy, exactly 26 candles in the past), look at the monthly chart of Bitcoin below.🔽 🟩The green line is Chiko Span (CS) and CS is nothing but the current price shifted 26 candles in the past. So the green line shows the current price and when you see where is the green line you see the past PA 26 candles in the past. See how the price was resisted exactly by the two lows of the past PA for two consecutive months. It literally closed just at their lows. So by observing CS and the past PA we know exactly which candle from the past acts as S/R and we can estimate where the current price may be supported/resisted - as you see, with full precision.

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5/15 I mentioned above that Ichimoku without Chiko Span is TA without essential context which can change the picture completely. Let me illustrate this with the following example.🔽 Look at the chart below (without Chiko Span), what do you see? ❓🐂 The price has broken above the kumo, the price is above Tenkan Sen, which is above Kijun Sen, the kumo in the future is bullish - this looks like a valid bullish breakout, doesn't it?

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6/15 Now look at the same chart, but this time with Chiko Span. 🌨️Where is it? - below the past cloud. I.e. below resistance. As I mentioned above, with Ichimoku it's a must always to analyse the market for two prices: the current price and Chiko Span. ❌🐂The price has made a breakout - but Chiko Span - not, and thus this is not a valid breakout. Now see below what happens next...

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7/15 What happens next is a terrible fakeout. Now you get it: Without Chiko Span you see a breakout. With Chiko Span you see a fakeout.

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8/15 🚦 Signals: CS can provide many different signals as the price itself can - because CS is also a price itself. Any CS breakout above or below a significant level is actually a signal. But there are also specific signals which are "native" only to Chiko Span. The first one is the Chiko Span breakout: when CS crosses the past PA completely from one side to the other side. If CS crosses the past PA from below to above this is a golden cross and is bullish, the opposite is a death cross and is bearish. For this signal to be valid, it's important two conditions to be met: 1⃣ After the breakout CS to be in a clear open space without neighbor candles creating obstacles. 2⃣The price must cross from below to above (or vice versa). If it is above the candles, then goes into them, then back above them - this is chop, not a CS cross signal.

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9/15 ⏰I like to call the CS cross a "time-based breakout" because CS works only based on time using the 26 Kihon Suchi number from the Time Theory. 🔥 And probably the most powerful thing about it is that it shows us if a horizontal support/resistance is likely to be broken based on when the price approaches it. Look at the below chart, one of my favorite examples, $ZEPH / $BTC. The price was supported by the black line for two consecutive candles - when CS was still above the past PA. ❓Then what happened? The price stayed on the same horizontal level and at first glance (or if you don't use CS) nothing changed. 💀 But as time moved on, CS moved already below the past PA, making a death cross. The only difference was time, not price. What happened next? 82% dump.

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10/15 Chiko Span tracing Chiko Span tracing is when CS is following the path of the past PA. Then we expect it to continue to do so at least until a certain shape of the past PA is finished being traced. While the tracing may be approximate and not exact (without fully touching the candles), a lot of the time it is exact (within the body of the candle) and allows us to forecast with amazing accuracy both prices and dates. See the chart below ($TAO). 🔽 We see that Chiko Span is following the past PA and there are two more candles from the same descending row to follow. Then, we can calculate which dates correspond to them as we add two candles to the future time-wise. ✍️🗓️📈And as we expect CS to be within the candles "on schedule" we know on which dates what price range to expect. This is a weekly chart and the current date range is 17th to 23rd of June. +2 weekly candles it equates to 1st July to 7th of July. And the price range of the last candle from the sequence of the past PA which we expect CS to visit, has a range between its low and high 193$-263$. So we expect that between 1st July and 7th of July the price to trade within this range. And as CS is the close current price shifted in the past we expect the week to close like that, i.e. we have even an exact forecast for the last, closing day of the week: 🔮 7th of July to close between 193$-263$. Now let's see what happens...

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11/15 🎯 Guess what, 7th of July closed at 216$ and the CS tracing kept playing out like a Swiss watch:

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12/15 Chiko Span divergence CS divergence is when CS follows the opposite direction of the candles at it. For example, if the past PA has a V shape at CS, and CS is going up but the past PA is going down, we expect when CS reaches the extreme of the past PA (the V bottom), the reversal to take place. 🔮🪤This is a very powerful technique not only to spot bull and bear traps, but to forecast future price movements - as we expect CS to keep rising till the price PA reverses, and then we can estimate after how many candles the reversal should take place. A CS divergence marked the April top for Bitcoin in 2021 on the monthly chart, see below:

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13/15 In conclusion, if you follow me you must have noticed that from all Ichimoku educational threads this one is the longest one. ⚠️⏰This is because while Chiko Span has by far the simplest formula (in fact it doesn't even have a formula, it just compares two prices), it has the most use cases and provides the most important context in the Ichimoku system - the time context. The Time Theory is rather an advanced stuff to master and it's used to forecast time cycles and each chart has its individual cycles. But just by using Chiko Span with the original settings of the Ichimoku indicator, to a big extent you can take the huge advantage of the Time Theory which is partially integrated in the indicator this way. 2⃣6⃣As 26 is the most important "standard cycle" for all assets - and as you see, it can work like magic.

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14/15 Previous lessons 1. The Ichimoku TA system https://x.com/drpastet/status/1807703250189099208 2. Tenkan Sen https://x.com/drpastet/status/1810173264020328553 3. Kijun Sen https://x.com/drpastet/status/1813659904688685089 4. Real and fake TK crosses https://x.com/drpastet/status/1815295282793390287 5. SSA https://x.com/drpastet/status/1817833046088843737 6. SSB https://x.com/drpastet/status/1822907741918175638 7. Kumo https://x.com/drpastet/status/1827755204713865373

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