Flat Top/Bottom Kumos

The flat top or bottom that is often observed in the kumo is key to understanding one piece of the kumo's "equilibrium equation". Just like the "rubber band effect" that a flat kijun sen can exert on price, a flat senkou span B can act in the same way, attracting price that is in close proximity. The reason for this is simple: a flat senkou span B represents the midpoint of a trendless price situation over the prior 52 periods - price equilibrium. Since price always seeks to return to equilibrium, and the flat senkou span B is such a strong expression of this equilibrium, it becomes an equally strong attractor of price.

In a bullish trend, this flat senkou span B will result in a flat bottom kumo and in a bearish trend it will manifest as a flat top kumo. The Ichimoku practitioner can use this knowledge of the physics of the flat senkou span B in order to be more cautious about both their exits out of the kumo. For instance, when exiting a flat bottom (bullish) kumo from the bottom, rather than merely placing an entry order 10 pips below the senkou span B, savvy Ichimoku practitioners will look for another point around which to build their entry order to ensure they don't get caught in the flat bottom's "gravitational pull". This method minimizes the number of false breakouts experienced by the trader.

See the highlighted areas in the chart for Figure V below for an example of flat top and bottom kumos:

Figure V - Flat Top and Flat Bottom Kumos