The Marubozu

Marubozu in Japanese means "Bald". It is named so because as per text book definition, Marubozu has got no upper and lower shadow, it has got just the real body. However, there is an exception to this rule where in, small shadow is acceptable in real market scenario. Also, Marubozu is the only candlestick to which, candlestick rule of 'look for prior trend' does not apply. When it appears on the chart, implications of earlier trend does not apply to this. 

There are two types of Marubozu

1. Bullish Marubozu
2. Bearish Marubozu 


Bullish Marubozu

In order for a candle to be termed as Bullish Marubozu, open must be equal to low and close must be equal to high as per text book rules but in real market scenario, a small lower shadow or upper shadow or both can be present. As I mentioned earlier, no matter what the prior trend is, it need not be considered and if bullish Marubozu forms, then it means bulls have established strong position, giving signal that stock is now bullish. Hence analyst should look into buying opportunities.


We can observe in the above Infy chart, post formation of bullish Marubozu, there is huge upward rally which any trader can utilize to his/her advantage.


The above chart is another example where the trade implication for Marubozu has worked by resulting in long upward rally.



In the above Bank Nifty chart, we can observe the following:

1. There is a formation of perfect Bullish Marubozu with absolutely no shadow.
2. It is an universal fact that any candlestick pattern, indicator or strategy does not come with 100% success rate and same can be observed in the above chart. We need to be prepared for such outcome by aiming towards minimizing the losses. Set the stop loss just like I have shown and make an exit instead of expecting for reversal of trend. Always remember the rule of technical analysis 'Trend continuation is more likely than reversal'.


Bearish Marubozu

A candle can be called as Bearish Marubozu if the open is equal to high and close is equal to low with no upper or lower shadow as per text book definition. But we need to keep flexibility rule in our mind and small shadows are acceptable in real market scenario. In this case, analyst can easily take 'short' position irrespective of what the prior trend is as formation of bearish Marubozu indicates sellers have established strong position leading to potential downtrend rally.



Above chart shows the perfect example of bearish marubozu, with long downward rally.


The above Bank Nifty chart is another example for a perfect Bearish Marubozu.



Like I mentioned earlier, not every opportunity can be successful, therefore our aim must be to minimize the losses with setting proper stop loss like I have shown in the above chart. 

To Summarize:

1. Bullish Marubozu is when open is equal to low and close is equal to high, where as Bearish Marubozu is when open is equal to high and close is equal to low with small or no shadows.
2. Prior trend does not matter for trade implications.









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