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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's High Wave

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 07/20/2017
21,612 -28.97 -0.1%
9,483 -92.64 -1.0%
720 5.10 0.7%
6,390 4.96 0.1%
2,473 -0.38 0.0%
YTD
9.4%
4.9%
9.1%
18.7%
10.5%
Tom's Targets    Overview: 07/14/2017
21,850 or 21,000 by 08/01/2017
9,950 or 9,400 by 08/01/2017
725 or 685 by 08/01/2017
6,450 or 6,175 by 08/01/2017
2,525 or 2,400 by 08/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Encyclopedia of Candlestick ChartsEncyclopedia of Candlestick Charts book., pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

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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.

High Wave Important Results

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.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

The ideal high wave candlestick
High Wave
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High Wave 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.

High Wave Identification Guidelines

CharacteristicDiscussion
Number of candle linesOne.
Price trend leading to the patternNone required
ConfigurationLook 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.
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High Wave: 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.

  1. High wave candles that appear within a third of the yearly low perform best -- page 412.
  2. High wave candles confirmed by an opening gap tend to perform best -- page 414.
  3. Breakouts below the 50-trading day moving average tend to outperform -- page 414.

High Wave Example

The high wave candlestick on the daily scale

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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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. First National Bank of Dad: Sorry, closed.