A Kumo subtlety

This morning the AUD/USD demonstrated an important point about how price interacts with the ichiMoku system.


RHS there is an incentive reversal move, looking for a pullback to enter. The highlighted Blue & Green candles in the center look like a good spot – the chikou is just breaking free, the EMA cloud is still positive, price is at a reasonable level for a continuation and looks to be stalling it’s downward move.

There is a problem though, the valley in the Kumo illustrated by the oval to the right of the entry. Price will often hug the Kumo and test it’s bounds before it moves on & that makes the valley a risk. The next highlighted green candle is the perfect entry – the chikou has cleared tested & rejected the Kumo, the EMA cloud remained positive throughout and the candle itself is a nice green hammer right in the EMA cloud.