What is 'Senkou Span B'

Senkou Span B is one of five major components used in the Ichimoku Kinko Hyo indicator. It is used along with the Senkou Span A line to create a cloud formation.

BREAKING DOWN 'Senkou Span B'

The Senkou Span B line and the Senkou Span A line are drawn together to form what is known as a cloud or kumo in the Ichimoku Kinko Hyo indicator. The Ichimoku Kinko Hyo indicator is a technical analysis diagram originating from Japan where it was developed by a newspaper writer. In addition to the Senkou Span B and Senkou Span A lines, the Ichimoku Kinko Hyo encompasses three other components: the Tenkan-Sen, the Kijun-Sen and the Chickou Span.

Senkou Span B and A

The Senkou Span B and Senkou Span A lines are used to create the cloud of the indicator. Senkou Span B is always plotted alongside Senkou Span A and the area between the two lines is shaded. The shaded area, known as the cloud, is then used to give traders an idea of future support and resistance. The Senkou Span B line is calculated by using the following formula which considers each day’s high and low over a 52-day time period:

Senkou Span B = (Highest High – Lowest Low) / 2

Senkou Span B is generally regarded as the slowest moving component of the Ichimoku indicator because it is created by using the greatest number of time periods in its calculation. Like Senkou Span A, this line is plotted 26 days ahead of the current time to form a forward looking indicator.

Senkou Span A forms the second component of the kumo cloud. Senkou Span A is calculated from the following and plotted 26 days ahead:

Senkou Span A = (Tenkan-Sen + Kijun-Sen) / 2

Together the two lines form what is known as a cloud. When Senkou Span B takes the top position in the cloud it is considered a bearish signal. These indicators are commonly used to predict the reversal of a current trend when the two Senkou Span lines cross over each other.

Source: FXStreet

Other Ichimoku Kinko Hyo Indicators

Three other components are also formed on an Ichimoku Kinko Hyo chart. These indicators include the Tenkan-Sen, the Kijun-Sen and the Chickou Span. With five components providing various indicators, the Ichimoku Kinko Hyo chart can provide a lot of insight through a single chart.

Tenkan-Sen: This line is calculated by using the following formula from a period of nine days:

Tenkan-Sen = (Highest High + Lowest Low) / 2

Kijun-Sen: Utilizes the following formula from a 26 day period:

Kijun-Sen = (Highest High + Lowest Low) / 2

Chickou Span: Trendline showing the closing price for the past 26 days.

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