Seeing Price Fractals with Ichimoku

19 ต.ค. 2021

It is always interesting to see the fractal nature of price action. It is the way that price tends to have very similar patterns on multiple timeframes. You see these repeating patterns in nature and they are expressed by mathematics in such ways as the Mandelbrot set.

Over the last few weeks the SPY has been riding along the lower edge of the Daily timeframe Ichimoku cloud. Basic Ichimoku principles use the cloud to determine the sentiment of price from bullish to bearish. However, I make sure to add one confirmation test to my analysis of Ichimoku. I look at Chikou, otherwise known as the Lagging Span or Momentum, to see which side of the cloud it is on. This very often avoids false breakouts and gives a patient assessment of the true nature of what price is doing. What may seem to be a trend reversal may only be a pullback. If Chikou does not confirm price then I assume price interacting with the cloud is just a major pullback.

That the market has done a major pullback seems to now be confirmed on the Daily timeframe. The interesting repetition of this pattern happened this morning on the 5m S&P 500 futures /ES charts. See below:

19 ต.ค. 2021

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The 5 minute chart at the open demonstrated the same pattern:

1. Price flirting with going to the bearish side of the cloud but...
2. Chikou was not yet confirming

Price went on to retest the high just as the Daily pattern is doing right now.

These pattern repetitions can be seen often across all instruments and their respective timeframes. It is the assumption that such patterns repeat frequently that is the basis of technical analysis and why it can be effectively used to increase the probability of winning trades.