The 19-year-old fell from a ferry travelling between Round Quay and Manly final evening.
He was thrown overboard at 7.30pm when the Clontarf ferry was jolted by a big wave.
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Witnesses stated he managed to make use of the torch on his cell phone to sign from the water.
Angie McIlwraith, who was on board, stated passengers had been "fairly panicked".
"The boys had been simply leaping on the again and certainly one of them jumped and as he went to the bottom, he simply misplaced his foot, and fell backwards and went overboard," she advised 9News.
The crew rescued the teenager and he apparently dried off earlier than leaving the ferry at Round Quay.
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