The science of technical analysis contains many important and famous patterns, as well as some that are not so well known. One such pattern that is not so well-known is the high wave candlestick pattern. While not employed commonly, traders must keep an eye on this pattern and using it intelligently can lead to potential positive trading outcomes.
Here’s everything you need to know about high wave candle patterns, their importance and interpretation.
The high wave candlestick pattern indicates that the market has become indecisive. It appears in the form of candles with short bodies and long upper and lower shadows, or wicks. The interpretation of its appearance is that there is tremendous movement in price in both directions, but the market or stock will close near the opening price.
This is a pattern that shows that both buyers and sellers are unable to dominate. It is usually observed during market consolidation or when it moves sideways and when traders don’t have much confidence in the next direction.
A high wave pattern might mean that a current upward or downward trend is losing steam. Again, this does not mean a trend change is on its way but rather the market could go either way. Traders tend to await other indicators for confirmation before acting on the high wave candlestick pattern.
Here’s how the high wave candlestick pattern is important in trading:
The high wave candlestick pattern demonstrates the confusion of the markets. It shows that during the trading session, there were selling and buying forces in play, but neither of the forces was able to overrun the other. Hence, the price fluctuated in both directions without anyone being able to dominate.
When interpreting the high wave pattern, consider the following:
Combining these high waves with other indicators can help traders interpret its meaning and confirm the market direction.