June 5,2016- Book Review of Ichimoku’s Fibonacci and Clouds 

Initially; people who first learn that the ebook is only 89 pages but retails at $75 are aghast about how a short piece of work will cost so much. However ; I have to caution that thinking given that it took me 2 weeks to digest and to study the book with second rereadings on certain parts.

The reason is substance. While the book’s length in pages will pale in comparison to some trading books’ page count of over hundreds of pages; they lack in depth.

This book is insightful; succinct and has lots of depth.  While others would normally just draw a swing high and a swing low to Understand the Fibonacci retracements; this book takes into great painful detail the differences of the pullback intricacies of a 38.2% pullback versus a 61.8% pullback and the likelihood of the extensions that would pan out.

In fact instead of using trend lines ; he uses a tool called Fibonacci Fan lines to help people see that stock prices correct not merely in price but also in time. When you consider the fact that a stock can do nothing for 3 months – that in itself tells you that a stock correcting in magnitude whether in a 90 degree angle or steeper than that requires a longer time before reversing. Those can be helped through fan lines.  See a snapshot below.


Fibonacci as a tool can be explored in many ways and this book discusses in the Philippine context how Fibonacci is his preferred method because it can project price supports and resistances without waiting. It is thus a leading indicator to him and which traders can benefit even before prices start to move.

In chapter 6 entitled “When do we make money?”; he mentions The ABCD pattern first highlighted by HM Gartley in 1935. Due to the parallelism of a “lightning bolt” pattern ; some people call it as such.


In projecting the future price targets; a man named Scott carney wrote a very good guide from his book “Harmonic Trading volume one : profiting from the natural order of the financial markets”; here based on how a stock price corrects and retraces ; the extension will vary. In this guide; the less the retrace (example 38.2 versus 78.6) ; the higher the projection ( 224 or 261.8 versus 127%)
See the guide below and memorize it if you want. Ichimoku believes this has been working quite effectively and showed how the PSEI has in fact corrected to the 61.8% during the Yolanda 2013 correction and has extended to the 127.2% before correcting yet again.
While this is not a perfect guide ; it remains useful (the 61.8 pattern usually coincides with the 161.8 as a projection but in this case – 127 acted as the initial resistance.) 
In this example; he tells us the potential reversal zone (PRZ) ; once you’ve seen the BC leg ; forecasting the D is as easy as using the “natural order guide” in the 78.6; the next potential zone is 127%; your drawing will show 5746 and indeed looking at the PSEI ; the markets indeed reversed from there like magic.

As Ichi said below, it works voila. Of course he doesnt guarantee this 100% but it’s worth noting that you can make your trading more profitable simply by knowing after a drop where the potential bounces could be.

Ichimoku then discusses the more intricate variations of the ABCD patterns. He didn’t invent this. It’s called the Alt 1.27AB=CD and the 1.618AB=CD pattern. Although you can make your own nicknames for these patterns; he sticks to his methods and simply coins what the harmonic practitioners calls them.

The 127 AB=CD means what it means. It only means that a 127% length of AB became the CD. So notice when a price makes a new low and you’re looking for a potential reversal zone of that pattern? You check the 127-161.8 of the AB length to check where the D point is.

Ichimoku shows more examples and the chapter 6 is I believe worth rereading upon;)

What else do I like? Chapter 7.

In chapter 7 called Beyond ABCD; he talks in depth what happens when the C is so strong that it moves above your AB. He calls this the Reciprocal AB=CD pattern. Can you recall when the stock makes a new high and then newer highs and you find yourself wondering where will you place your buys ? – you’re essentially going to wait for retracements after the new highs or new extensions have been made. A case study of FGEN is cited below as example.



Here fgen makes a huge V reversal above the previous resistance and manages to extend as high as 140% ; our table shows us 70% as the next probably pullback point where we can enter. True enough after correction to 70%; fgen continues its price path upward. There’s a natural order to things indeed.

I suggest you Read that chapter again 🙂

In chapter 8; Ichimoku discusses convergences and confluences.

He painstakingly details that when a lot of Fibonacci levels all cluster within a price zone; it acts as an important price support or price resistance. You don’t want to bet for a huge breakdown when there are strong support confluences not a strong price breakout when it’s hovering at huge resistances.

Here’s his example snapshot below ; he mentioned how difficult 7200 was. They both resided as resistances in the daily and weekly time frames. Hence the ability for PSEI to move above 7200 took a lot of time money and effort from many traders before advancing.


*****

Before I fully share almost all of the insights Ichimoku placed in his book ; let me share a table of contents for you to realize what he wrote and how strongly I recommend traders to take advantage of his book.

Perhaps we can make a group discount for all Bookaka members who’d buy Ichimoku’s book as I strongly recommend everyone get well versed about the many details in Fibonacci which they can take advantage of in the markets.


These are the contents of his book.

I suggest people take a good look of this book.

Study this.

Spend time with this.

Use this for your trading in stocks and currencies.

Use the natural order of things to determine where you buy; set stops; sell; target and it will greatly help probabilities of trading success.

All tools he mentions are part and parcel of every charting program.  You can freely chart these through your normal charting softwares whether provided by your brokerage firms or thru the usual free complentary trading sites in the Philippines.

Thanks 🙂

Bookaka incorporates tradingview.com softwares where you can easily plot the Fibonacci tools (retracements; extensions; fans and so forth)

So does amibroker; chart nexus; TradeApp; investagrams – end of day/ Fibonacci is a bread and butter tool for most traders as all default trading softwares around.

I’d still be rereading many parts.

Don’t mistake length with depth.

This is short but warrants further rereading and memorizing upon.

– Faceless Trader

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