Marubozu
Marubozu means there are no shadows from the bodies. The high and low are represented by the open or close
Marubozu means there are no shadows from the bodies. The high and low are represented by the open or close
A White Marubozu is a long white body with no shadows which indicates a bullish trend. It forms when the open equals the low and the close equals the high. This indicates that buyers controlled the price action from the first trade to the last trade. It usually becomes the first part of a bullish continuation or a bullish reversal pattern.
A Black Marubozu is a long black body with no shadows. It forms when the open equals the high and the close equals the low. This indicates that sellers controlled the price action from the first trade to the last trade. It usually implies bearish continuation or bearish reversal.
Spinning Tops
Candlesticks with a long upper shadow, long lower shadow and small real body are called spinning tops. The color of the real bodies are not very important. The pattern indicates the indecision between the bullish and bearish trends.
The small real body (whether hollow or filled) shows little movement from open to close, and the shadows indicate that both bulls and bears were active during the session.
Even though the session opened and closed with little change, prices moved significantly higher and lower in the mean time.
Neither buyers nor sellers could gain the upper hand and the result was a standoff.
After a long advance or long white candlestick, a spinning top indicates weakness among the bulls and a potential change or interruption in trend.
After a long decline or long black candlestick, a spinning top indicates weakness among the bears and a potential change or interruption in trend.
Doji
Doji lines are patterns with the same open and close price.
Ideally, the open and close should be equal. While a doji with an equal open and close would be preferred, it is more important to capture the essence of the candlestick.
Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level. The result is a standoff.
Neither bulls nor bears were able to gain control and a turning point could be developing.
Determining the importance of the doji will depend on the price, recent volatility, and previous candlesticks. Relative to previous candlesticks, the doji should have a very small body that appears as a thin line.
A doji that forms among other candlesticks with small real bodies (such as spinning tops) would not be considered important. However, a doji that forms among candlesticks with long real bodies would be deemed significant.
There are four special types of Doji lines. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. The word "Doji" refers to both the singular and plural form.
Doji and Trend
The relevance of a doji depends on the preceding trend or preceding candlesticks. After an advance, or long white candlestick, a doji signals that the buying pressure is starting to weaken.
After a decline, or long black candlestick, a doji signals that selling pressure is starting to diminish. Doji indicate that the forces of supply and demand are becoming more evenly matched and a change in trend may be near. Doji alone are not enough to mark a reversal and further confirmation is needed.
After an advance or long white candlestick, a doji signals that buying pressure may be thinning and the uptrend could be coming to an end.
Where a price declines simply from a lack of buyers, continued buying pressure is needed to sustain an uptrend. Therefore, a doji may be more significant after an uptrend or long white candlestick. Even after the doji forms, further downside is required for bearish confirmation. This can come as a long black candlestick or a decline below the long white candlestick's open.
After a decline or long black candlestick, a doji indicates that selling pressure may be diminishing and the downtrend could come to a close.
Even though the bears are starting to lose control of the decline, further buying strength is required to confirm any reversal. Bullish confirmation could come from a long white candlestick or advance above the long black candlestick's open.
Before turning to the reversal candlestick patterns, there are a few general guidelines to cover.
To be continue.....Reversal Patterns
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