Understanding the Marubozu Candlestick Pattern

In the course of your online trading journey, you will discover various types of technical charts. These charts are covered in different colours and patterns that serve as indicators and help you identify the various trading trends – bullish, bearish, uptrend, downtrend, and so on. Along with the fundamental analysis of stocks, you must also read these charts and patterns as part of your technical analysis. Candlestick patterns are especially popular, and experienced traders know them like a second language. This article can help you understand the Marubozu candlestick pattern; one of the most popular types of candlestick patterns. Read on.

Marubozu candlestick – meaning and interpretation

Derived from the Japanese word ‘Marubozu’, which literally translates to ‘bald’, the Marubozu pattern is formed with a single, candle. According to traders, the perfect Marubozu is a candle that has no shadows – upper or lower, unlike most other candlestick patterns. This candlestick pattern typically has, what is considered as a ‘real body’ and is categorised into two types – the bullish Marubozu candle and the bearish Marubozu candle. These candlestick patterns strongly indicate a reversal or continuation of a trend, depending on their appearance on the trading chart.

Trading with Bullish and Bearish Marubozu candlestick patterns

Based on the candlestick colour reflecting on the trading chart, it means that either buyers or sellers have got complete control of the market. The trading style also differs based on the type of the Marubozu candle. That said, irrespective of whether it is a bearish or bullish Marubozu, it is imperative that you wait for another confirmation candle before you enter into a trade. Let’s understand bullish and bearish Marubozu in detail.

Trading with Bullish Marubozu 

There are four things you need to know about trading with Bullish Marubozu candles. They are as under:

1. In a bullish Marubozu, the absence of upper and lower shadows indicates that the low price is equal to the opening price, whereas the high price is equivalent to the low price.

2. Bullish Marubozu indicates an increased buying interest in a given asset among traders, so much so that traders are willing to buy the asset, irrespective of its price point during a session. This causes the asset’s price to close near its high point during that session.

3. Bullish Marubozu candles appearing in an uptrend strongly indicate the continuation of a trend. However, when they appear in a downtrend, it implies a trend reversal. Such a situation signifies a change in the market’s sentiment, indicating that the stock or asset traded is now bullish.

4. With the sharp sentiment change, traders expect to see a bullish surge, anticipating it to continue over a few upcoming trading sessions. In this case, traders should look for new buying opportunities after the bullish Marubozu

Trading with Bearish Marubozu 

Like with bullish candles, you should know four things about trading with bearish Marubozu candles. They are as under:

1. As is apparent from the term ‘bearish’, this Marubozu pattern indicates extreme bearishness in the trading market. In this pattern, the high price of an asset or a stock is equal to its opening prices, whereas the low price is equivalent to the closing price.

2. The bearish Marubozu candle signifies the complete control of the sellers on the market. Such is the level of the selling pressure that market participants are willing to sell their stocks or assets at every possible price point in the session. This causes the stock or asset’s price to close near its low point in that particular session.

3. The appearance of the bearish Marubozu in a downtrend indicates the continuation of a strong trend. However, if the candlestick appears in an uptrend, it indicates a trend reversal, implying a change in the market’s sentiment.

4. Traders, essentially expect that the sharp change in the market sentiments will result in a surge of bearishness, which they expect will continue for a few upcoming trading sessions. In such a situation, traders should be on the lookout for selling opportunities after the bearish Marubozu

Final note:

Marubozu candles are typically the most apparent candles to locate on trading charts due to their distinct bright colours, bald shape and lack of shadows. However, it is quite rare for traders to identify the perfect Marubozu pattern in an actual market, which is why they generally neglect minor differences (less than 0.01 per cent) between the opening and closing price of assets, with the high/low price. At Angel One, we provide all the technical analysis charts and patterns to help you identify and make informed trading decisions. For more information on Morubozu candlestick patterns and other technical analysis tools, reach out to an Angel One expert.