Definition:
High Wave is a type of candlestick characterized with
either a very long upper or a lower shadow. It has only
a short real body. A group of these patterns may signal
a market turn.
Recognition Criteria:
1. The real body of the candlestick is small. Its color
is not important.
2. Either the upper or the lower shadow, or both shadows
are long.
Explanation:
The High Wave just like long legged doji shows that
there is a great amount of indecision in the market.
This pattern is formed when prices trade well above
and/or below the day's opening price, but then the price
closes almost at the same level as the opening price.
It means that the end result is not different from the
initial open despite the whole excitement and volatility
during the day. The pattern implies a loss of sense
of direction and that there is a great amount of indecision
in the market. A group of high wave candlesticks signal
a possible reversal in the market.
Important Factors:
High Wave is especially important at tops.
High Wave is also a single candlestick pattern. Hence
a confirmation is definitely required in the form of
an opposite move to the prior trade on the next trading
day in order to judge that a reversal may be starting.
