Chikou Span

The chikou span is calculated in the following manner:

CHIKOU SPAN ("lagging line")

CURRENT CLOSING PRICE time-shifted backwards (into the past) 26 periods

The chikou span represents one of Ichimoku's most unique features; that of time-shifting certain lines backwards or forwards in order to gain a clearer perspective of price action. In the chikou span's case, the current closing price is time-shifted backwards by 26 periods. While the rationale behind this may at first appear confusing, it becomes very clear once we consider that it allows us to quickly see how today's price action compares to the price action of 26 periods ago, which can help determine trend direction.

If the current close price (as depicted by the chikou span) is lower than the price of 26 periods ago, that would indicate that there is a potential for more bearish price action to come, since price tends to follow trends. Conversely, if the current closing price is above the price of 26 periods ago, that would then indicate the possibility for more bullish price action to follow.

Consider the charts in Figures IV and V below:

Figure IV - Chikou Span in Bullish Configuration
  

 
Figure V - Chikou Span in Bearish Configuration

In addition to providing us with another piece of the "trend puzzle", the chikou span also provides clear levels of support and resistance, given that it represents prior closing prices. Ichimoku practitioners can thus draw horizontal lines across the points created by the chikou span to see these key levels and utilize them in their analysis and trading decisions (see Figure VI below).

Figure VI - Chikou Span Support and Resistance Levels