”Marubozu” In Japanese, the term means “close-cropped.” Other common terms for the marubozu include “shaven head” or “shaven bottom.” Commonly, the marubozu is a long candle that implies the day’s 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 create a new term and call a long candle without either an upper or lower shadow a “full” marubozu. Although not generally recognized as a major reversal candle, I believe it should in fact be added to this category.
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 gap, most stocks experience a minor reversal, which leaves a small shadow. In addition, if a stock has moved sharply higher during the day, daytraders 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 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, 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 day’s trading to see if there is follow through. If the stock you’re analyzing is at the end of a very mature Minor uptrend, then you are likely spotting a reversal.