In this post, we are going to talk about a candlestick pattern known as Marubozu, along with a few exhibits that may help you solidify your understanding of this pattern.
Please remember this is an educational post to help all of our members better understand concepts used in trading or investing. This in no way promotes a particular style of trading!
The candlestick charts offer a quick picture into the psychology of buyers and sellers. Before proceeding further, a few things to keep in mind: → A bearish candlestick indicates the opening price of the session being higher than the closing price. → Similarly, a bullish candlestick indicates the opening price of the session being lower than the closing price. → The shadow at the top and bottom represent the high and low for the session. → The size of the real body is indicative of the strength of the trend.
What is a Marubozu pattern?
A Marubozu is a candlestick with a full real body and no shadows. This solid body indicates a strong trend, be it in any direction. The name Marubozu comes from the Japanese and means "close-cropped", indicating a candle with no shadow.
Marubozu can be divided into two types, depending on the bias. ∎ Bullish marubozu ∎ Bearish marubozu
A Marubozu can appear anywhere in the chart irrespective of the prior trend; the trading implication remains the same.
⚠️ Please notice the textbook definition of a Marubozu is a candle with no shadows. However, in practice, the ideal setups rarely occur. Hence, there is a little bit of wiggle room on either side.
🟩 Bullish Marubozu
→ In a bullish Marubozu, the lack of the upper and lower shadow indicates that the low and high are equal to the open and close, respectively. However, there may be some shadows in reality, therefore we must be versatile within limits.
→ A bullish Marubozu indicates that market participants are willing to buy the stock at any price point throughout the day. As a result, the stock closes near the session's high.
→ In general, the occurrence of a bullish Marubozu indicates that the sentiment has strongly shifted to the upside and we can see higher prices in the coming sessions. Hence a trader should look for buying opportunities whenever the price pulls back to lower levels.
Exhibit 1: Bullish Marubozu
Exhibit 2: Bullish Marubozu with subsequent uptrend
🟥 Bearish Marubozu
→ In a bearish marubozu, the open price is almost equal to the high whereas the session closes near the low price.
→ A bearish Marubozu indicates a strong bearish sentiment because the market participants are willing to sell the stock at any price point throughout the day.
→ In general, the occurrence of a bearish Marubozu indicates that the sentiment has strongly shifted to the downside and we can see lower prices in the subsequent sessions. Hence a trader should look for selling opportunities whenever the price pulls back to higher levels.
Exhibit 1: Bearish Marubozu
Exhibit 2: Bearish Marubozu with subsequent down trend