CANDLE 16: THE FULL MARUBOZU IS A CANDLE WITHOUT SHADOWS In Japanese, the term marubozu means close-cropped. Other common names for the marubozu include shaven head or shaven bottom. Typically, the marubozu is a long candle that implies the days trading range has been large. A marubozu candle lacks either an upper or lower shadow. On rare occasions it can lack both an upper or lower shadow. I am going to add a new term to candlestick terminology and call a long candle without either an upper or lower shadow a full marubozu. If you spend a lot of time at the trading screen, then you probably realize that a full marubozu is a very unlikely occurrence. Even after a strong up gap, most stocks experience a minor reversal, which leaves a small lower shadow. The same is true for the down gap. In addition, if a stock has moved sharply higher during the day, day traders often seek to nail down profits toward the end of the session. This creates a small upper shadow. Conversely, if a stock has sharply declined, then some short sellers will generally cover before the close of trading. Because of this, stocks rarely close on their absolute low. In these cases there will be a small lower shadow. When a full marubozu occurs, or one that is very close to full, it is very well worth noting. If it is a white candle, then it signals extreme conviction among buyers. Conversely, if it is a dark candle, then it indicates sellers were eager to flee. As always, you should pay careful attention to the next days trading to see if there is follow through. A full or nearly full Marubozu implies that there is strong buying or selling interest depending on the color. If there is follow-through early the next day, the stock is likely to trend in that same direction for the next few sessions. That awareness can be important for the trader.
Posted on: Mon, 15 Sep 2014 16:02:43 +0000
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