Introduction: The Marubozu
Marubozu is a candlestick which has no upper and lower shadow. A Marubuzo has only the real body as you can see in the picture below. After reading this post you will be able to identify this pattern in any chart and make trading decisions accordingly.
There are two types of Marubozu candlesticks :
- Bullish (Green)
- Bearish (Red)
Basically, Marubozu implies dominance, so in whichever time-frame this candle appears, if it is green it shows that buyers have completely dominated that session and if it is red it shows that sellers have completely dominated that session.
The body of this candle must be long and must have almost no shadows.
Interpretation of Marubozu Candlestick
Now coming to the most essential part of it that is the interpretation of this candlestick pattern :
- If you find a bullish marubozu after a downtrend, it means that the time has come for reversal of trend. The downtrend has come to an end and the buyers are now ready to buy the stock.
- If you find a bearish marubozu after a downtrend, it means that it will be a continuation of the trend.
- Similarly, if you find a bullish marubozu after an uptrend, it means that it will be a continuation of the trend.
- If you find a bearish one after an uptrend, it means that the time has come for reversal of trend. The uptrend has come to an end and the sellers are now ready to sell the stock.
This example will clear everything for you.
In the chart below (Asian Paints Daily Chart), you can see a clear downtrend preceding the Bullish Marubozu, hence you expect a reversal of the trend from next day and this is what happens.
Important Points: Marubozu
- The trend can be confirmed by waiting for one more session after this candle occurs in the chart and seeing the trend. If you are expecting a reversal and the in the next session the trend does not reverse then you need not enter the trade.
- Simply avoid trading during a very small (< 1% range) or long candle (> 10% range)
Conclusion: Candlestick Pattern: The Marubozu
You can use this knowledge of Marubozu Candlestick to understand the future trend in the market and make the best trading decisions along with knowledge of other indicators such as RSI, ADX, MACD etc.