What is the Marubozu Candlestick Pattern?

Volatility in the stock market is one of the most common factors that affect the prices of the stocks, and you will not be the only one undertaking that risk while investing in stocks. If the risk and volatility are so common, how do professional investors make so much profit? The answer lies in their desire to learn and learn about the financial market’s various aspects, especially technical analysis.

Technical analysis is the study of chart patterns, graphs and diagrams on a screen. The idea is to understand price and volume trends and pick stocks accordingly. Technical analysis is based on the premise that historical price trends tend to repeat over time. This analysis makes the core of their investment strategy, and within it, they use candlestick patterns. Among numerous candlestick patterns, one of the most widely used is the Marubozu candlestick pattern.

But, before you read on to understand about the Marubozu candlestick pattern, let’s understand candlestick patterns.

What is the Marubozu candlestick pattern?

To start off, the word Marubozu is a Japanese word that means ‘bald head’ or ‘shaved head’. This wording is because of the absence of shadow or wicks on the candlestick, making the candle look like it is bald. Unlike most candlestick patterns, the Marubozu candlestick pattern stands out because of no upper or lower shadow.

The Marubozu candlestick pattern is also considered to have a ‘real body’, a term that is used to divide it into two categories: Bearish Marubozu candlestick pattern and Bullish Marubozu candlestick pattern. The basic meaning behind this pattern is that having no shadow indicates that the opening and the closing price of a specific stock will be the same based on the maximum price of the candle.

Analysts use the Marubozu candlestick pattern to gain valuable insights into the future direction of a particular stock’s price. After analysing the Marubozu candlestick pattern, the investors use the data to hold new positions or adjust their present positions accordingly.

How to identify the Marubozu candlestick pattern?

The Marubozu candlestick pattern is a single candlestick pattern, making it relatively easy for investors to identify. The Marubozu candlestick pattern, unlike any other candlestick pattern, can be identified by its feature of having a real body without any shadows.

Typically, when the market is bullish, the candlestick patterns have two kinds of candles, white or green. However, when the market is bearish, the candlestick patterns have red and black candles. A bearish Marubozu candlestick pattern always has the open price identical to the day’s high price and the close price identical to the day’s low price. On the other hand, a bullish Marubozu candlestick pattern always has the open price equal to the day’s low price and the close price identical to the day’s high price.

You can identify a Marubozu candlestick pattern through the following mark for the spinning top:

• A specifically large real body.
• No shadows at either end of the candle.
• The colour of the candle will tell investors about the bearish or bullish market trend.

How to Trade using Marubozu Bearish and Bullish Candlestick patterns?

During a bullish Marubozu candlestick pattern, the low price equals the open price, and the high price equals the close price. This type of Marubozu candlestick pattern indicates that a specific stock is garnering so much buying interest that they are willing to buy the stock at any price during a trading session.

This buying interest results in the price closing near the high price. An investor looking to trade using the bullish Marubozu candlestick pattern can predict that the trend will continue if there is an uptrend. However, if the bullish Marubozu candlestick pattern shows a downtrend, it means that the trend may get reversed, and the stock is now bullish based on the changing investor sentiment. A trader usually looks for buying opportunities at the time of a bullish Marubozu candlestick pattern.

During a bearish Marubozu candlestick pattern, the high price equals the open price, and the low price equals the close price. This type of Marubozu candlestick pattern indicates that the sellers are taking over the market volume. Furthermore, it means that so much selling is happening in the market that the investors are willing to sell at any price during a trading session. This sell-off results in the price closing near the low point for the trading session.

If there is a downtrend in the bearish Marubozu candlestick pattern, it means that the current trend is likely to continue in the future. However, if there is an uptrend in the Marubozu candlestick pattern, then the trend may reverse, and the stock is now bearish based on the changing investor sentiment. At this time, an investor looks towards selling the holding as the price may fall further after the bearish Marubozu candlestick pattern.

Final Words

The Marubozu candlestick pattern is one of the most easily identified patterns that you can see in all chart time frames. Using the data, you can get valuable insights to predict where the market trend may go from here. However, as the Marubozu candlestick pattern is just one signal included in the technical analysis, it is vital that you use other technical indicators along with the pattern for an improved vision of stock trading to mitigate losses.