Friday, May 11, 2012

High Wave

High Wave_NeutralHIGH WAVE
Type: Reversal
Relevance: Indecision
Prior Trend: N/A
Reliability: Medium
Confirmation: Required
No. of Sticks: 1

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.

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.


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