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Written and copyright © 2008-2009 by Thomas N. Bulkowski. All rights reserved.
In my book,
Encyclopedia of Candlestick Charts  , pictured on the right,
I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines
in the tests.
The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines,
performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators),
and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy
by clicking on the above link.
The high wave candlestick reminds me of the long legged doji candlestick only the high wave is not a doji. Both have tall upper and lower shadows.
The high wave candle can be any color, but the long legged doji has no body so it has no color.
The high wave acts as a reversal just 51% of the time (think random) and a mid list performance rank of 67, where 1 is best out of 103 candlestick types.
Important Results
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Theoretical performance: Indecision
Tested performance: Reversal 51% of the time
Frequency rank: 17
Overall performance rank: 67
Best percentage meeting price target: 77% (bull market, up breakout)
Best average move in 10 days: -3.38% (bear market, down breakout)
Best 10-day performance rank: 60 (bear market, up breakout)
All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.
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 High Wave
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Discussion
Testing the high wave candle shows that it acts as a reversal 51% of the time, which is about random, and that agrees with theory (indecision). The high wave candle appears
often, giving it a frequency rank of 17 (a rank of 1 means most often, 103 means almost invisible).
Overall performance is well behind the leaders, ranking 67. The best move came
after downward breakouts in a bear market. Price dropped an
average of 3.38% whereas a good move would be over 6% in 10 days. The best performance over 10 days ranks 60 and that happened in a bear market after an upward breakout.
Identification Guidelines
| Characteristic | Discussion |
| Number of candle lines | One. |
| Price trend leading to the pattern | None required |
| Configuration | Look for tall upper and lower shadows attached to a small body. The body is not a doji (meaning that the opening and closing prices must be
more than a few pennies apart. |
Three Trading Tidbits
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book
where the tips appear.
- High wave candles that appear within a third of the yearly low perform best -- page 412.
- High wave candles confirmed by an opening gap tend to perform best -- page 414.
- Breakouts below the 50-trading day moving average tend to outperform -- page 414.
Example
The high wave candlestick shown on the daily chart at point A appears in an uptrend. For that reason, I would expect the breakout to be upward
and that is what happens (a breakout is when price closes either above the top or below the bottom of the candlestick).
The high wave candle has tall upper and lower shadows with a non-doji body. That means the opening and closing prices are far enough apart to show a body color.
-- Thomas Bulkowski
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