The ‘High Wave Doji’ is a single candlestick pattern marked by extreme price action that in the end closes at the same level as its open. When found at the top of a bullish market this becomes a medium credibility bearish reversal pattern. In ‘Japanese Candlestick Charting Techniques’, Steve Nison refers to a single such candlestick as a ‘long legged doji’. When the open and closing levels are right at the center of the candlesticks range, Nison refers to this as a ‘rickshaw man’, much like a person and the wooden traces being pulled in a traditional rickshaw of 19th century Japan.
Technical Description
1) The bearish ‘High Wave Doji’ is preceded by a bullish trend.
2) The ‘High Wave Doji’ ideally should gap up or be above the body of the preceding candlestick.
3) The size of the wick and tail should be roughly equal their sum extending at-least near the average candlestick range.
4) There should be virtually no real body, or an extremely small one.
Mark’s Perspective
The long wick and tail for the candlestick marks the struggle between bulls and bears. At one point through out the period one or the other side appears to be in control only to cede it with the market getting no where in the end. The sudden burst of activity after being preceded by rising prices marks a surge in bear power. Shorts may be taken on a downside gap with the latest candlestick or on a black candle with a lower close. Stop losses must be placed above the high of the doji.