Educational Post
MARUBOZu
Marubozu is a single candlestick pattern and a very important candlestick pattern.
In the Japanese language, the word “Marubozu” means “Bald”.
Deriving from that, a perfect marubozu means a candle with no upper or lower shadow. It will only have a real body.
A marubozu candle can be of two types – the bullish marubozu and the bearish marubozu.
This pattern is a strong indication of trend reversal or trend continuation depending on where it appears.
Benefits of Marubozu Candlestick
Marubozu’s biggest advantage is that, from the Marubozu pattern, we can identify the performance of a stock in the market, also we get a clear-cut trend of the stock.
With Marubozu Candlestick, the trend of the market can be detected very accurately, whether the market will go up or down, we just need to know how to identify the Marubozu candle correctly.
Identification of Marubozu Candlestick Patterns
Marubozu Candle can appear anywhere in the chart,
what was the TREND before the formation of Marubozu, that is, the previous TREND is not important,
the identity of Marubozu is that Marubozu candle has only REAL BODY,
it’s LOW (LOWER SHADOW) Or HIGH (UPPER SHADOW) is not there, even if there is very little LOWER SHADOW or UPPER SHADOW, it can still be called Marubozu.
There are two types of Marubozu Candle
1. Bullish Marubozu Candle
When the Color of the Candle is Green i.e. Bullish, then we call Marubozu or Bullish Marubozu Candle.
It’s exactly the opposite of the Bearish Marubozu Candlestick Patterns.
When a Bullish Marubozu (large green candle) appears on the charts, it’s a sign of bullishness.
A Bullish Marubozu gets formed when the price opens at a certain level, rise, and closes strongly. The bulls are in complete control of the stock.
A big investor or some institution could’ve initiate their long position in the stock.
This can also happen if there is good news related to the company or if a company announces financial results that are above expectations.
If Bullish Marubozu is formed in the chart So what does this mean?
If Marubozu is a Bullish Candle then it means, in the time frame in which Marubozu candle is made, all the sellers i.e. Bulls have been strongly influenced in that trading session, and people can buy the shares at that price.
2. Bearish Marubozu Candle
When the Color of the Candle is Red i.e. Bearish, then we call it Marubozu or Bearish Marubozu Candle.
It’s exactly the opposite the Bullish Marubozu Candle.
When a Bearish Marubozu (large red candle) appears on the charts, it’s a sign of bearishness.
A Bearish Marubozu gets formed when the price opens at a certain level, falls and closes weakly. The bears are in complete control of the stock.
A big investor or some institution could’ve cut their position in the stock.
This can also happen if there is a bad news related to the company or if a company announce financial results that are below expectations.
Bearish Marubozu Candle
If Bearish Marubozu is formed in the chart So what does this mean?
If Marubozu is a Bearish Candle then it means, in the time frame in which Marubozu candle is formed, all the sellers i.e. BEARS have been strongly influenced in that trading session, and people can sell the shares at that price.
How to trade Marubozu Candlestick Patterns
Depending on the color of the candle, it simply means that either the buyers or the sellers got full control of the market.
Depending on the type of Marubozu, the trading style will be different. We will now discuss how to trade with both Bullish Marubozu and Bearish Marubozu.
But in either case, you should wait for another confirmation candle or pattern before entering into a trade.
Trades with Bullish Marubozu Candle
The absence of the upper and lower shadow in a Bullish Marubozu Candle means that the low price is equal to the open price and the high price is equal to the close price. Hence whenever we see a candle with Open = Low and Close = High, we can call it a Bullish Marubozu Candle.
A Bullish Marubozu points that there is so much buying interest in the stock (or instrument) that the market participants were willing to buy the stock at every price point during that session. Therefore the price of the stock closed near its high point for that session.
If the Bullish Marubozu appears in an uptrend it strongly implies a trend continuation. But while appearing in a downtrend, it indicates a trend reversal, that the market’s sentiment has changed and the stock is now bullish.
The expectation is that with this sharp change in sentiment there will have a surge of bullishness and the same will continue over the next few trading sessions. Hence a trader should look for buying opportunities after the occurrence of a bullish marubozu. The suggested buy price is a little above the closing price of the marubozu (Bullish Breakout).
Bullish Marubozu Candle Trade Setup
It does not matter if a stock is in a downtrend or uptrend, when a Bullish Marubozu (large green candle) appears on the chart, it’s considered to be a very bullish sign. And that’s why we should buy the stock. And our position should be LONG.
BUY PRICE – BULLISH Marubozu CANDLE around the CLOSING PRICE
STOP LOSS – BULLISH Marubozu around the CANDLE to LOW PRICE
