Summary
Candlesticks are a core tool in chart analysis, providing insights into market sentiment and trends. Individual candlesticks, such as Marubozu candles, can offer strong signals of bullish or bearish movements, helping traders make informed decisions. This article explores the significance of single candlesticks and how wicks, shadows, and candle position impact interpretation.
Key Takeaways
- Key Factors in Single Candle Interpretation: The significance of a single candle depends on its color, position, size, and the length of the wick and shadow. These factors aid in assessing market sentiment.
- Marubozu Candles as Strong Trend Indicators: Marubozu candles, which have no wick or shadow, are viewed as extremely bullish (white Marubozu) or extremely bearish (black Marubozu), signaling strong market trends.
- Variations of Marubozu Candles: Depending on the presence of a wick or shadow, variations like Closing and Opening Marubozu candles exist, indicating trend strength based on specific wick patterns.
Single Candlesticks and Their Significance
When evaluating a single candlestick, the surrounding context is always relevant.
The following factors are important:
- The color of the candle
- The position of the candle
- The size of the candle
- And sometimes the presence or absence of a wick and tail, as well as their length
Marubozu Candles
A Marubozu candle is a single candle with neither a wick nor a tail. In a rising Marubozu candle (closing price > opening price), it is referred to as a Long Marubozu or White Marubozu. The candle should be longer than previous candles.
In a falling Marubozu candle (closing price < opening price), it is called a Short Marubozu or Black Marubozu. The candle should be longer than previous candles.
For a White Marubozu candle, the price increased during this time frame, with the closing price above the opening price.
Since there is neither a wick nor a tail, the price moved upwards from the start of the candle (time frame) and closed at the highest price.
For a Black Marubozu candle, the price fell during this time frame, with the closing price below the opening price.
Since there is neither a wick nor a tail, the price moved downwards from the start of the candle (time frame) and closed at the lowest price.
Interpretation
A long White Marubozu candle is considered extremely bullish as it lacks both a wick and a tail. It is the most bullish of all long white candles, opening at the low and closing at the high.
A long Black Marubozu candle is considered extremely bearish as it lacks both a wick and a tail. It is the most bearish of all long black candles, opening at the high and closing at the low.
- Bullish: A market is referred to as bullish, or a bull market, when buyers are driving prices up.
- Bearish: A market is referred to as bearish, or a bear market, when sellers are driving prices down.
Closing Marubozu
Closing Marubozu candles have a wick or tail at the opening, depending on whether it is a white or black candle. However, the closing price is at the high for a white candle and at the low for a black candle. A white Closing Marubozu candle therefore has no wick, and a black Closing Marubozu candle has no tail.
As with the standard Marubozu, a Closing Marubozu candle should be longer than the previous candles.
Interpretation
A long white Closing Marubozu candle is also considered extremely bullish, as it has no wick. It is interpreted as strongly bullish, similar to the White Marubozu candle.
A long black Closing Marubozu candle is considered bearish, as it has no tail. It is interpreted as strongly bearish, similar to the Black Marubozu candle.
Opening Marubozu
Opening Marubozu candles have a wick or tail above the closing price, depending on whether it is a white or black candle. However, the opening price for a white candle is at the low, and for a black candle, it is at the high. Therefore, a white Opening Marubozu candle has no tail, and a black Closing Marubozu candle has no wick.
As with other Marubozu candles, an Opening Marubozu candle should be longer than previous candles.
Interpretation
A long white Opening Marubozu candle is also considered extremely bullish, as it has no tail.
A long black Opening Marubozu candle is considered bearish, as it has no wick.
Long Candle
When long candles have a short wick and a short tail, they are referred to simply as Long White candles and Long Black candles.
The candle should be longer than previous candles, and the lowest and highest prices should be very close to the opening or closing prices, respectively.
Interpretation
It is a strong candle, though not as strong as a Marubozu candle, since prices outside the candle body were traded close to the opening and closing prices, resulting in a small wick and a small tail. Nonetheless, the long white candle is considered bullish, and the long black candle is considered bearish.