Blockchain and Cryptocurrency Beginner - About Kumo Cloud and Its Two Lines

Kumo Cloud

In cryptocurrency technical analysis, the Kumo cloud which is also known as the Ichimoku cloud is a very popular technical analysis indicator that helps determine support and resistance levels on a cryptocurrency price chart. This indicator is considered as an all-in-one indicator and is usually used by traders to determine the momentum on a price chart. The Kumo cloud is also a trend-following indicator which means that it can be used to predict future trends and price movements.

The Kumo cloud is one of those technical indicators that look very complicated on the outside but is actually not that complicated to understand and is without a doubt a very powerful indicator that provide a lot of signals on a chart. Using the Kumo cloud indicator, traders can spot great signals on a chart and also determine the current trend in the market so as to know the potential entry and exit points by giving unique perspective on support and resistance levels. Using the kumo cloud to identify support and resistance areas, traders take notice of the position of the price and the kumo cloud. When the kumo cloud is below the price, it becomes the support and when the kumo cloud is above the price, it becomes the resistance.

AAVE/USDT Chart

Kumo Cloud Lines

The Kumo Cloud is made up of two lines, the Leading Span A and the Leading Span B. Both the leading line A and the leading line B work hand-in-hand as the kumo cloud is in-between the leading span A line and the leading span B line.

• Senkou Span A - The Senkou span A line is also known as the leading Span A. It is the first line of the Kumo cloud. The leading span A line is used for signaling future support and resistance areas on a cryptocurrency chart. It makes use of historical data to determine future trend of the market. Also, the leading line A above the Senkou span B can signal that the market is bullish. Calculating the Senkou Span A is basically done by adding of the conversion line and the base line and dividing the result by two. This is then projected 26 periods ahead. In the chart below, the Senkou span A is above the Senkou span B which signals bullish. On the chart, the market is bullish because the Senkou span A is above the Senkou span B.

AAVE/USDT Chart

• Senkou Span B - The Senkou span B line is also known as the leading Span B. It is the second line of the Kumo cloud. The leading span B line is very similar to the leading span A, however, they are both calculated differently. In the leading line B, the edge of the kumo that was formed from the resulting line is used for determining future support and resistance areas. Also, the leading line B above the Senkou span A can signal that the market is bearish. To calculate the Senkou span B, highest high + the lowest low on the past 52 periods, divided by two which is then projected 26 periods ahead. In the chart below, the Senkou span B is above the Senkou span A which signals bearish. On the chart, the market is bullish because the Senkou span B is below the Senkou span A.

AAVE/USDT Chart