Japanese journalist Goichi Hosoda developed the
ichimoku cloud and published the idea in the late 1960s. It interprets
information taken from candlestick charting.
The body of this chart suppresses all the usual
indicators I use, to highlight the Ichimoku cloud, which is what I want to
illustrate. The cloud itself consists of pink and green patterns, but it also
has indicator lines in blue, red and green.
In this case, it applies
to Fossil Group Inc. (FOSL), the purveyor of consumer fashions and
accessories under labels such as Fossil, Diesel, Adidas and Burberry. Since
October 2014, its share price has dropped by more than $100 – $60 since last
August. Today the share has a price-to-book of 1.5, and a 20-per-cent return
on equity. In fundamental terms, that makes it quite attractive.
Full disclosure: I recently bought some, based on the
stock’s double bottom (share prices are now trading through the resistance
they established last January 20th) and the little green cloud on
the far right of the chart.
The trend is up when prices are above the cloud’s
future-based projection, down when prices are below the cloud and flat when
they are in the cloud itself. The cloud is the most prominent feature of the
Ichimoku Cloud plots.
There are two ways to identify overall trend using the
cloud. The trend is up when prices are above the cloud, down when prices are
below it and flat when prices are within. Techies see the uptrend as stronger
when the green cloud line is rising and above the red cloud line. This
situation produces a green cloud. Conversely, they worry when the green line
is falling and below the red line – a situation which produces a pink cloud.
Because the cloud projects activity 26 days into the future, it offers a
glimpse of future support or resistance. In this case, the green cloud seems
to suggest that prices are about to rise.
Of course, I could be wrong. I never make buy or sell
recommendations.
