Bearish Marubozu

The bearish marubozu is a one-bar bearish continuation Japanese candlestick pattern that historically leads to a quick bullish bounce.

Yes, that’s not a typo–the data shows us that this popular bearish candle often leads to bullish action.

But before you decide this frequently occurring pattern isn’t worth your time, what if I told you that you could make your profits skyrocket by doing the opposite of everyone else?

Would you be interested?

If this gets you excited, let’s learn how to trade the bearish marubozu in a data-driven way.

What Is a Bearish Marubozu Candlestick Pattern?

Bearish Marubozu Candlestick Pattern Illustration © Analyzing Alpha
Bearish Marubozu Candlestick Pattern Illustration

The bearish marubozu is a one-bar candlestick pattern that most traders consider bearish. And nothing could be further from the truth. 

It derives from the Japanese word for “close-cropped”.

But before we go over the historical data and the backtest of this candlestick pattern’s historical performance, let’s learn how to identify the bearish marubozu on our candlestick charts.

How to Identify the Bearish Marubozu Candlestick Pattern

Bearish Marubozu Candlestick Pattern Identification on the Apple (AAPL) March 2nd, 2021 daily chart
Bearish Marubozu Candlestick Pattern Identification on the Apple (AAPL) March 2nd, 2021 daily chart

The following are the requirements for a valid marubozu pattern:

  • The candle must have a long bearish real body with little to no upper and lower wicks.

This frequently occurring pattern is easy to identify. We see it on the Apple February 2nd, 2021, daily chart as a large bearish with little to no shadows.

I deliberately removed the moving average as the bearish marubozu pattern doesn’t require a trend.

I also purposely selected a candle with a larger upper wick to show that there is some discretion when identifying these patterns.

Now that we know how to identify these bearish marubozu candlesticks, let’s improve our trading skills and understand its various setups.

How to Trade the Bearish Marubozu Pattern

According to our backtests, the best trading strategy across all markets is to do precisely the opposite of how most professional traders use this pattern – instead of going bearish; one should go bullish, expecting a longer bullish move. 

But before becoming bearish marubozu samurai masters, let’s learn how most traders trade this bearish marubozu candle.

Bearish Marubozu Bearish Trade Setup

Bearish Marubozu Bearish Trade Setup on the Google (GOOG) May 1st, 2019 daily chart.
Bearish Marubozu Bearish Trade Setup on the Google (GOOG) May 1st, 2019 daily chart.

After an earnings miss, we see a long red bear candle with a tiny lower shadow on the Google daily chart.

Traditional traders enter short on a break of the low of the bearish candlestick.

And while the above trader made money, they’re trading against what history tells us. Instead, traders who like to get probability on their side need to look bullish.

Bearish Marubozu Bullish Trade Setup

Bearish Marubozu Bullish Trade Setup on the Netflix (NFLX) February 3rd, 2021 daily chart.
Bearish Marubozu Bullish Trade Setup on the Netflix (NFLX) February 3rd, 2021 daily chart.

Data-driven traders enter long at a break of the high with a stop loss below the low of the marubozu.

In the above Netflix example, we see our big red long line. We wait until the confirmation limit, typically three days, for the price to rise above that high to enter. The price moves above the high of the previous marubozu candle the next day, triggering an entry.

Using a bullish trading strategy made money for this data-driven trader. 

Speaking of data, let’s take a look at the backtest.

Does the Bearish Marubozu Work? (Backtest Results)

I backtested the bearish marubozu candlestick pattern on the daily timeframe in the crypto, forex, and stock markets using the following rules:

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Many candlestick patterns look almost identical to bearish marubozu candlesticks.

Bullish Marubozu vs. Bearish Marubozu

Bullish Marubozu Candlestick Pattern Illustration © Analyzing Alpha
Bullish Marubozu Candlestick Pattern Illustration

The bullish marubozu candlestick pattern is the opposite of its bearish counterpart. The only difference between a bullish marubozu candle and its bearish counterpart is that one is precisely that – one is bullish closing near the high, and the other is bearish closing near the below.

Both are traditionally traded as bar continuation patterns, and the backtest data tells us that intelligent traders should look in the opposite direction.

Bearish Closing Marubozu vs. Bearish Marubozu

Bearish Closing Marubozu Candlestick Pattern Illustration © Analyzing Alpha
Bearish Closing Marubozu Candlestick Pattern Illustration

The bearish closing marubozu and bearish marubozu are close cousins. Both have a long black body, close at or very near the low, and neither requires a trend.

The only difference between the bearish closing marubozu and bearish marubozu is that the bearish closing has an upper shadow, whereas the other does not.

Bearish Long Line vs. Bearish Marubozu

Bearish Long Line Candlestick Pattern Illustration © Analyzing Alpha
Bearish Long Line Candlestick Pattern Illustration

The bearish long line and the bearish marubozu share a lot in common. While mistaking these patterns for each other won’t harm your trading results as they’re traded optimally in the same way, these patterns are identical, except the bearish long line has small wicks on both ends. In contrast, the bearish marubozu has little to no shadows.

Bearish Engulfing vs. Bearish Marubozu

Bearish Engulfing Candlestick Pattern Illustration ©Analyzing Alpha
Bearish Engulfing Candlestick Pattern Illustration

The engulfing characteristic of a candlestick pattern often gets confused with marubozu candlesticks. 

Engulfing means that the previous candle’s open and close fits within the real body of the current candle, as seen in the below bearish engulfing pattern.

In other words, the type of candle doesn’t matter. A marubozu candle could engulf the previous candle or be engulfed by the next candle.

The Bottom Line

The bearish engulfing is a frequently occurring pattern in all markets. It’s considered a bearish pattern, but the historical data across all markets tested suggests that the best trading strategy for a bearish engulfing pattern is to go bullish, not bearish.

Interested in becoming a Japanese candlestick samurai? I ranked and reviewed all the best candlestick patterns explained with examples.

Leave a Comment