What is Senkou Span A (Leading Span A)?
Senkou Span A, or Leading Span A in English, is one of five components of the Ichimoku Cloud indicator. Leading Span A is a line used to measure momentum and can provide trade ideas based on support and resistance levels. It works in conjunction with the Senkou Span B line to form a cloud formation known as a "kumo." It is also called Leading Span A because the calculation is plotted 26 periods into the future, showing where support and resistance may form down the road.
- Senkou Span A forms a cloud with Senkou Span B. It is called a cloud because the area between the two lines is shaded in or colored.
- The cloud, and the lines that comprise it, may act as support or resistance. When the price is above them they act as support, when the price is below them they act as resistance.
- While Leading Span A only uses historical data, it is considered leading or predictive because its values are plotted in the future, showing where support or resistance is expected in the future.
The Formula for Senkou Span A (Leading Span A) is
How to Calculate Senkou Span A (Leading Span A)
- Calculate the Conversion Line by finding the high and low for the last 9 periods.
- Calculate the Base Line by finding the high and low for the last 26 periods.
- Calculate the Leading Span A using the Conversion Line and Base Line.
- Plot the Leading Span A value 26-periods into the future.
- Repeat the process at the end of each period.
What Does the Senkou (Leading) Span A Tell You?
The Senkou Span A line and Senkou Span B line are used together to form the cloud formation in an Ichimoku Kinko Hyo diagram, also called the Ichimoku Cloud. The Ichimoku Cloud originated inJapan and combines five different lines which provide the trader with different insights.
Senkou Span A is related to Senkou Span B, as these lines form the "cloud" which is a main component of the Ichimoku Cloud indicator.
The Senkou Span B line is considered to be the slower moving of the two lines because is calculated using 52 periods of data ((52-period high + 52-period low) / 2). Senkou Span A, on the other hand, uses data based on 26-periods and 9-periods, so it will react quicker to price changes.
Generally, when Senkou Span B takes the top position in the cloud it is considered a bearish signal. This is because short-term prices have fallen below the longer-term price mid-point. The Senkou Span lines measure the mid-point of a price range because they are dividing the combined high and low by two.
When the Senkou Span A line takes the top position in the cloud it is considered a bullish signal since the shorter-term price is moving above the longer-term mid-point price.
Crossovers between Span A and Span B can signal a trend change, from bearish to bullish or vice versa.
When the price is above Span A and/or Span B, these lines may act support and present possible buying areas. When the price is below Span A and/or Span B, these lines may act as resistance, providing possible areas to sell or short.
The Difference Between Senkou (Leading) Span A and a Simple Moving Average (SMA)
On a chart, the Senkou Span A and a simple moving average (SMA) may look similar, but their calculations are quite different. An SMA is calculated by taking X number of closing prices, adding them up, and then dividing that number by X. The Leading Span A is calculated using highs and low from the last nine and 26 periods. These calculations are divided by two to create a mid-point, not an average like the SMA. The Senkou lines are also plotted in the future. While SMAs can be plotted in the future, it isn't the norm.
Limitations of Using the Senkou (Leading) Span A
While the Senkou Span A can seem predictive because it is plotted in the future, all its calculations are based on historical data and therefore it is still a lagging indicator. Because it finds the mid-point of a price range it will be slow to react to sharp price changes. This means crossovers could occur well after a large price move has already taken place, or the price may move way past a Senkou Line (support or resistance) because the line doesn't have time to react and change course.
The Senkou (Leading) Span A should be used in conjunction with other analysis methods such as price action analysis, fundamental analysis, or other technical indicators to help confirm or reject trade signals.