The "High Wave" Candle and the Importance of Intraday Charts by steve Nison(cmt)

[Scubawarrior]

A spinning top is the nickname the Japanese give to candle lines with small real bodies. Spinning tops have "cousins" named "high wave candles." High wave candles also have diminutive real bodies, either white or black. To qualify as a "high wave," however, these candle lines must not only have small real bodies but also long upper and lower shadows. The shadows of the high wave candles need not be the same size, but both the upper and lower shadows have to be unusually long.

The reason this is called a "high-wave" candle is because the Japanese compare the much extended upper and lower shadows to large ocean waves. Once again we get a sense of the pictorial representation the Japanese give to the names of the candle signals.

A high wave candle shows us that the market has, as the Japanese say, has "lost its sense of direction." The rationale behind this expression is that the high wave candle's long upper shadow means that sometime after the session's open, buying pressure thrust the security's price to an extended high. During the same session, selling pressure drove the price to protracted low. Yet, by the session's close, the price returned almost to the opening price. That's confusion! So, a high wave candle is a hint that the prior trend is losing momentum.


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