Ask Colin

What is the importance of the candles for 20 May, 5, 11, 14, and 24 June 2002 on MIM?

All these candles are known as Marubozu. A Marubozu is a large candle with no shadow at either end or at only one end.

Where there is a shadow at only one end, it is either an opening Marubozu if there is no shadow at the end of the real body that is the opening price, or a closing Marubozu if there is no shadow at the end of the real body that is the closing price.

20 May, 14 June and 24 June are black closing Marubozu

5 June is a white opening Marubozu

11 June is a white closing Marubozu (as also are 31 May and 3 June

Marubozu, like all large candles tell us that the buyers (white candle) or sellers (black candle) were strongly committed throughout the day. It is one of the strongest candles.

An opening Marubozu tells us that there was no lack of commitment at the open, because the market traded away from that price and never came back. However, the shadow at the closing end of the real body indicates some lack of commitment at the end of the day, compared to a simple Marubozu.

A closing Marubozu tells us that there was strong commitment at the end of the day, because the market closed at its high or low. However, the shadow at the opening end of the real body suggests that there was some lack of commitment then, compared to a simple Marubozu.

This is the theory. You will have to apply it to the MIM chart yourself, because the law does not allow me to advise you about a current chart.

By the way, if all you have studied is Louise's excellent, but very introductory book, I suggest you learn more before trying to use candlestick charting. I recommend Steve Nison's book Japanese Candlestick Charting Techniques, Gregory Morris's book CandlePower and, of course the subject E171 Specialised Techniques in Technical Analysis at the Securities Institute of Australia (see my web site www.bwts.com.au Ask Colin section, Education page or the ATAA web site www.ataa.com.au).

Keyword: