What is Marubozu Candlestick Pattern
Marubozu is a Japanese word that means Dominance. Thus, it is an extremely powerful candlestick that depicts change in trend.
The Marubozu Pattern is interpreted by traders as a clear sign that the preceding downturn or upturn is coming to an end and the trend is about to reverse.
It implies that buyers / sellers have changed their mind about the stock and perhaps indicate a shift in the general trend.
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Properties of a Marubozu Candlestick Pattern
A candle with a long actual body and no shadows is called a Marubozu.
If the candle’s body is green, the Marubozu is bullish. On the other hand, if the candles body is red, the Marubozu is bearish.
- Marubozu Candlestick has a lengthy body on either side and a very light or no shadow.
- A Green Marubozu candlestick indicates that the stock opened at a given level and continued to rise without decreasing.
- A Red Marubozu forms when the price starts plummeting at a specific moment and doesn’t stop.
The candlestick formation in the Marubozu pattern is a sizeable red / green candle, which denotes intense selling / buying pressure and a big decline / incline in price.
This notion suggests a shift in the market’s attitude, with sellers / buyers taking charge and driving the prices in their favour.
This candlestick pattern totally engulfs the wicks of the candle, and there is no formation of shadows. This is the hallmark of the Marubozu pattern.
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What can be predicted on the Formation of Marubozu Candlestick Pattern
The following are the most likely conditions that can happen on the formation of Marubozu Candlestick Pattern:
- Change in Trend of a Stock
- Change in Traders Perspective
- High Buy / Sell Order
Change in Trend of a Stock
On the formation of a Marubozu Candlestick Pattern, one can indicate a change in trend of a stock.
While, a Red Marubozu indicates that there is a sudden dominance in sellers in the market, thereby driving the price down.
On the other hand, a Green Marubozu indicates that the buyers have entered and created dominance. These buyers will now drive the prices higher.
It can be rightly indicated that the stock at these levels could be highly overvalued that the sellers / buyers have entered to heavily short / buy the stock. Thereby, indicating a high chance of trend reversal.
Change in Traders Perspective
One can observe a change in traders perspective on the stock market on the formation of Marubozu Candlestick.
When a Red Marubozu Candlestick is formed after a continuous bull run rally of the stock, the markets can rightly assume that the bull run has come to an end and the downtrend or consolidation has begun.
Thus, the traders have shifted their opinion on a stock to make it further bullish and commence with a changed perspective.
High Buy / Sell Order
When the big players (like domestic or foreign institutes) have entered the markets, and have placed a huge selling / buying order.
When the institutes have entered into the trade and the Marubozu Candlestick is formed, it is a clear indication that the current stock prices are either overvalued / undervalued.
This mechanism states that the institutes have either exited / entered the trade.
Conclusion
It’s important to keep in mind that different traders and technical analysts may read candlestick patterns slightly differently.
Thus, it’s always a good idea to combine this strategy with other tools and analysis techniques to maximise the likelihood of correct forecasts.
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