Bearish Marubozu Candlestick Pattern – Psychology & Trading plan

Bearish Marubozu Candlestick Pattern: traders and speculators rely on technical analysis to analyze and predict the future movement of the price in the market. Candlestick patterns are a part of technical analysis preferred by traders to understand and predict the future price movement in securities.

Here in this article, we shall discuss the Bearish Marubozu Candlestick Pattern with its meaning, formation, and how to set up a trade with the pattern formation.

Bearish Marubozu Candlestick Pattern – Meaning

A Bearish Marubozu is a single candlestick pattern that indicates a strong bearish movement. Marubozu in Japanese means ‘bald’; in terms of candlesticks, it means that a candlestick without a wick with a long real body will be considered marubozu. So, a bearish candlestick (red candle) with no wick and a long real body is considered a bearish marubozu.

A Bearish Marubozu Candlestick (red candle) can appear anywhere regardless of the trend. Meaning, it can appear at a downtrend, uptrend, or in a sideways market. The best-case scenario for this pattern to appear is after a significant uptrend as it indicates a reversal in the momentum.

The appearance of a Bearish Marubozu Candlestick Pattern indicates that there is high selling pressure irrespective of the trend.

How to Identify a Bearish Marubozu Candlestick Pattern?

A Bearish Marubozu Candlestick Pattern is quite easy to identify on the chart. Whenever you come across a bearish candlestick (red candle) that is comprised of only a long real body and doesn’t have any wick, then it is a bearish marubozu. The technical definition of a Bearish Marubozu is that open price = high price and close price = low price. 

In the market, there might be a small difference between the open and high prices and similarly, there might be a small difference between the close and high prices. The trader can consider it a bearish marubozu if the difference is very minute.

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Bearish Marubozu Candlestick Pattern – Psychology

A Bearish Marubozu Candlestick Pattern has no wick because the selling intent is so high that the sellers are willing to sell the security at every price in that time frame. From the open price, the sellers are willing to sell at every price, and hence the price doesn’t go above the open price and its close price is equal to the lowest price.

No matter what the previous trend was, the appearance of a bearish marubozu is a strong indication of the bearish movement.

Key characteristics of Bearish Marubozu Candlestick Pattern

1. The candlestick has no wick
2. The candlestick must be a bearish candle (red candle).
3. The candlestick must have a long real body.
4. It can appear anywhere irrespective of the trend and once formed it indicates a bearish movement.
5. It is generally observed with high bearish volumes as well.

Bearish Marubozu Candlestick Pattern – Trading Ideas

• Entry – The proper entry is to take a short position at or below the close price of the bearish marubozu. A trader should only take a short position after the close of the bearish marubozu candle.

• Target – Traders can exit the trade when the price of the stock reaches near the immediate support zone. Once this level is reached, you can also book partial profits in the trade and hold on to the remaining position until the next support level.

• Stop loss – The stop loss should be placed right above or at the open price of the bearish marubozu candlestick.

Bearish Marubozu Candlestick Pattern – Example

In the above one-day chart of STATE BANK OF INDIA, a Bearish marubozu was formed. As discussed in this article, the price went down after the formation of the bearish marubozu candlestick.

When this bearish marubozu candlestick was formed, traders could’ve taken a short position at Rs. 568, and the stop loss was at Rs. 597

Read more: Rising Window Candlestick Pattern

Conclusion

In this article, we understood what is Bearish Marubozu Candlestick Pattern, its meaning, its characteristics, and how a trader can take a trade. A bearish marubozu gives a strong bearish indication and the trader must couple it with the volume indicator to confirm its bearish movement.

It is also recommended that traders place appropriate stop loss in place so that the loss can be minimized in cases where the trade goes against the analysis. What do you think about this pattern, please let us know in the comment section.

Written by Praneeth Kadagi

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