Spinning Tops Candlesticks

spinning tops are small bodied candlesticks either bullish or bearish

Spinning tops are candlesticks with small real bodies and indicate that neither the bulls nor the bears are in control. Spinning tops can act as a warning that after a strong move upward, bulls are losing strength.

High Wave Candlesticks

small bodied candles with large upper and lower shadows

High wave candles are like spinning tops, but they have long upper and lower shadows. According to Nison (2003, p. 29), "if spinning tops translate into indecision on the part of bulls and bears, high wave candles translate into downright confusion."

Location of Spinning Tops and High Wave Candles

Spinning tops and high wave candles are only applicable after an uptrend or downtrend. Whereas a long bullish candlestick with small shadows shows that the bulls are in charge, a spinning top or high wave candlestick after bullish candles in an uptrend indicates that the bulls are not in control like they were before and the upward trend might turn into a neutral period of consolidation or even reverse downward. Similarly, when a string of long bearish candlesticks forms a downtrend, it is clear that the bears are in charge. However, when spinning tops or high wave candles appear after a downtrend, it is clear that the bears no longer are completely in charge and a period of consolidation or reversal upward could be expected.

Spinning Tops Candlestick Chart Example

spinning tops at the top of an uptrend on a candlestick chart

The chart above of the S&P 500 ETF (SPY) shows that after a strong move higher with three bullish candlesticks (three white soldiers), two spinning tops appear. These spinning tops suggest that there is indecision among the bulls and the bears. After the second spinning top, a bearish candlestick appears and signals that the decision has been made; the bears are in charge and the bears successfully begin a move downward.

High Wave Candles Candlestick Chart Example

high wave candles at the bottom of a downtrend

The chart above of the Energy SPDR (XLE) shows the indecisiveness of the high wave candlesticks at the bottom of a downtrend. Each of the four bearish candlesticks had either a large upper or lower shadow showing that there was much uncertainty in the market when prices reached the area of those high wave candles. Only when a large bullish candlestick moved higher was a clear bottom formed and a new uptrend begun.

Works Referenced

  1. Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
  2. Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
  3. Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
  4. Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
  5. ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.