A Marubozu candlestick pattern is a stock chart pattern that can help investors get insight into market sentiment at any given time. Although the marubozu pattern works quite well when it’s spotted, it remains relatively unpopular among investors.
We examine the basics and key characteristics of the pattern so that you can start harnessing the power of this little-known stock market predictor.
What Is A Marubozu Candlestick Pattern?
Marubozus are full-body bullish or bearish candlesticks without upper wicks or lower shadows. Marubozus are generally green or white when bullish and red or black when bearish on stock charts.
The appearance of a marubozu candlestick pattern typically signifies the market traded to the close with no retracement. When the marubozu is bearish, the price closed at the period low. A bullish marubozu means the price closed at a high for the specified period.
Marubozu is a component of Japanese candlestick patterns that can be used to indicate how a certain stock traded for the day.
The stock market is essentially a tug of war between buyers and sellers — some days, one side wins, and the marubozu candlestick forms. This formation allows traders to gauge how the sentiment of people of traders when it comes to viewing the market at any given time. Smart traders use this insight into how other investors are feeling to their advantage.
How To Trade Marubozu Candlestick Patterns
Follow these steps to trade marubozu candlestick patterns:
- Watch the market and wait for a bullish or bearish candlestick to form.
- When bullish, take a long position once the price breaks above.
- Place stop below the candlestick.
- When bearish, take a short position once the price falls below.
- Place stop above the candlestick.
Trading Bullish Marubozu
What Does a Bullish Marubozu Mean? In a bullish marubozu, the lower and upper shadows are absent, indicating the low price is equal to the open price, and the high price is the same as the close price. So, any time you see a candle with a low open and high close, it’s a bullish marubozu.
This type of candlestick illustrates the fact that there is so much buyer interest in the particular stock that traders are willing to buy the stock no matter the price during the specific trading session. Thus, the stock price closed around the high point for the session in question.
How Do You Trade Bullish Marubozu? When a bullish marubozu appears during an uptrend, it’s a strong implication of a trend continuation. But, when it appears in a downtrend, it implies a trend reversal — a change in trader sentiment caused the stock to now be bullish. When this sharp change takes place, surges of bullish patterns that will likely continue over the next few trading sessions are expected. Thus, traders should be on the lookout for buying opportunities after bullish marubozus.
A bullish marubozu is a pattern that is neutral or a continuation of a trend pattern that’s largely based on the psychology that the current trend is strong enough to keep going, and significant one-sided strength has caused the market to fail to make a lower low than the stock’s opening price and therefore closed at its highest point.
Trading Bearish Marubozu
Bearish marubozus indicate the high price is the same as the open price, and the low price is the same as the close price. So, when you see a candle with open equal to the high and close equal to low, it’s what’s known as a bearish marubozu.
This pattern shows that sellers are in complete control of the market and that there is so much selling pressure that investors are willing to sell their stocks at any time during the trading session. Therefore, the stock price closed near the low for the period.
If a bearish candlestick shows up during a downtrend, it indicates a trend continuation. However, when it appears during an uptrend, it works as a trend reversal pattern showing that market sentiment has changed and the stock has become bearish.
During this sharp sentiment shift, a surge of bearishness is expected — and will persist for the next few trading sessions, meaning traders should seek out chances to sell after a bearish marubozu.
The Bearish marubozu pattern is neutral or a continuation of a trend that’s based on the psychology that the current trend is strong enough to keep going. When this pattern appears, the market has failed to make a higher high opening and therefore closed at its lowest point due to significant strength from one side.
What Happens After a Marubozu Candle?
It’s actually quite difficult to predict what will happen after marubozu candles, which is quite different from other candlestick patterns, including doji, which are known for their reversals.
To remedy this, it’s recommended to use the Marubozu as a complementary trading tool to other trading strategies. For instance, use the marubozu with other tools such as indicators and chart patterns.
What Is A Black Marubozu Candle?
As the name suggests, black marubozu candles are long black candles. They have little to no upper or lower shadows, and their patterns illustrate a day controlled by sellers, from opening bell to market close, and the market is therefore in a bearish pattern.
What Is A White Marubozu Candle?
White marubozu candles have long white bodies and form when the open is the same as the low and the close is the same as the high.
A white marubozu candle indicates buyers controlled the market from open to close, and the market is considered very bullish.
How Do You Pronounce Marubozu?
Marubozu is pronounced “maire-eh-bow-zoo.” It is a Japanese term for a bald or shaved head, which is shown when wicks or shadows are absent on the candlestick — thus, the candlestick is also “bald,” which means the price of the stock at opening or closing will be equal to the candle’s maximum prices. A shadow absence shows the trading session opened at a high price and closed at a low price (or vice versa).
Bullish marubozus have long, green bodies, indicating the bulls were in total control throughout trading hours, causing the stock to close with a higher price than when it opened, and it did not have a price that was higher or lower, causing wicks to form. Most traders perceive these candlesticks as very confident.
Bearish marubozus have long, red bodies, indicting the bears were in control, driving the price of the stock down and closing lower than opening. There were no highs or lows that formed wicks.
When you think of marubozu lines, think flat. These lines are always flat, no matter whether it’s at open bell or close of day. When the marubozu is full, the open and close lines will appear flat.
Opening Marubozu
The thing about opening marubozus is that they only give us a piece of the puzzle. For example, when bullish at opening bell, we know the price never fell below the opening price. But, that doesn’t mean there wasn’t some retracement when the market closed.
This may indicate that bullish sentiment in the market started to fall, and by the time the market closed, it was losing some upward drive, leading to a retracement that produces the candlestick’s upper shadow line.
It’s the opposite with bearish opening marubozu candles — these patterns look similar to belt holds.
Closing Marubozu
Investors are typically more interested in closing marubozu candlestick patterns because it tells them much more about the stock’s price activity later on in the day, at closing time.
Similar to opening marubozus, closing marubozus can also be bullish or bearish. When the closing is bullish, the price closes at the period high.
In bearish closings, the price closed at the lowest level, signifying no upward price retracement from the low line.
Marubozu Reliability
Marubozu candlesticks can be an extremely useful trading signal thanks to their simplicity and ease of interpretation. But, of course, like any chart tool, it has its imperfections. Marubozu’s predictive ability isn’t fixed and rather varies quite significantly across charts and times.
So, if it works one time, you may not have the same effect the next, meaning when your trading the pattern, it’s important to look at a broad spectrum of different elements, including the pattern on the specific chart’s directional breakout probabilities and the existence of other signals, including trends, resistance areas, and supports.
In closing, the marubozu candlestick can be seen in every chart time period frame, and you shouldn’t justify a trade from one sole signal.
Instead, it’s important to see what the technical analysis indicates and what patterns they’re a part of. This is why studying candlesticks is an important component of sharpening your trading skills.
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