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 bottom of a bear market this becomes a medium credibility bullish 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 days range, Nison refers to this as a ‘rickshaw man’, a reference to the runner and the wooden traces that he pulls in a traditional rickshaw of 19th century Japan.
Technical Description
1) The bullish ‘High Wave Doji’ is preceded by a bear trend.
2) The ‘High Wave Doji’ ideally should gap down at the open or be found below the body of the preceding candlestick.
3) The size of the wick and tail should be roughly equal, their sum nearly equal to the average candlestick range if not bigger.
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 some 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 steadily declining prices marks a surge in bull power. Buys may be taken on an up gap with the latest candlestick or on a white candle with a higher close. Stop losses must be placed below the low of the doji.