White Marubozu | Finschool By 5paisa

The White Marubozu is a Japanese Candlestick Pattern and it is a bullish reversal pattern. It appears after the price decline and shows rejection from lower prices. This pattern is bullish because traders expect a bull move after the White Marubozu appears. It is a reversal pattern because when the prices go down White Marubozu appears and also it is a frequent signal of the end of a trend. The White Marubozu pattern is also a mirrored version of the Black Marubozu Candlestick pattern.

How to Identify The White Marubozu Candlestick Pattern

The White Marubozu candlestick pattern is formed by one single candle where the body is big and wicks are small or non-existent. This pattern is relatively easy to spot compared to other candlestick patterns. The colour of the candle is always green for a white Marubozu. The opening price will be equal to the day’s low and the closing price will be equal to the day’s high. The candle will have a large body and there will be a huge gap between the opening and the closing price. There is no wick on the upper and lower part of the body. The longer the body the more bullish the signal because it indicates that the buyers are placing purchase orders aggressively.

Variants of the White Marubozu Candlestick Pattern

The White Marubozu Candlestick Pattern may appear a little different on charts.

There are three versions of the White Marubozu:

Full: No wicks at the top or bottom
Open: No wicks at the bottom, but a small wick at the top
Close: No wicks at the top, but a small wick at the bottom

Trading Strategy for “White Marubozu” pattern

To trade the White Marubozu candlestick pattern it’s not enough to simply find a candle with the same shape on your charts. Where it appears. This means that the same shape appearing at different locations may have different meanings. When trading the White Marubozu, we want to see the price first going down, making a bearish move. A White Marubozu appearing after this bearish move is a sign of a possible reversal to the upside. The formation of a white Marubozu candle does not necessarily mean that the stock will continue to rise. The bears may take over the market the next day. Therefore, it is always best to confirm the suspicion by waiting for the candles that appear after the Marubozu. Other technical indicators such as volume, trend lines, etc should be combined with this pattern to confirm the trade.

Strategies To Trade The White Marubozu Candlestick Pattern

Strategy 1: Pullbacks On Naked Charts

As a bullish reversal pattern, the White Marubozu is a great pattern to watch for when the price is on an uptrend. Just wait for a pullback to start, and then spot when the White Marubozu appears. That often signs the end of the pullback and the start of the new leg to the upside.

Strategy 2: Trading The White Marubozu With Support Levels

Support and resistance levels are great places to find price reversals. Since we are looking for moves to the upside, we want to trade the White Marubozu using support levels.

How does it work:

Draw support levels on your charts
Wait for the price to decline and hit the support level
Check if a White Marubozu appears at that level
Go long when the price breaks the high of the White Marubozu
Set your stop loss and take profit levels, and expect a move to the upside

Strategy 3: Trading The White Marubozu With Moving Averages

Moving averages are great trading indicators to trade trends.

The idea here is to trade pullbacks to the moving average when the price is on an uptrend.

How does it work:

Find an uptrend, with the price jumping above a moving average
Wait for a decline in the price to the moving average
Check if a White Marubozu appears at the moving average
Go long when the price breaks the high of the White Marubozu
Set your stop loss and take profit levels, and expect another leg to the upside

Strategy 4: Trading The White Marubozu With RSI Divergences

This is a bit different from the other trading strategies.

To find a bullish RSI Divergence we want to see the price on a downtrend first, making lower lows and lower highs.

Here’s how it works:

Find a downtrend
Mark the lows that the price makes after each leg to the downside
At the same time compare the price lows with the RSI indicator
When you see the RSI making higher lows while the price making lower lows, you found your divergence
Now you wait until a White Marubozu appears at a price lower low, aligned with an RSI higher low.
Go long when the price breaks the high of the White Marubozu
Set your stop loss and take profit levels, and expect a move to the upside

Strategy 5: Trading The White Marubozu With Fibonacci

Another popular way of trading the White Marubozu candlestick is using the Fibonacci retracement tool. Fibonacci shows retracement levels where the price will tend to revert frequently.

Depending on the strength of the trend, different levels are more likely to work better with the White Marubozu pattern. Here you can learn more about the different Fibonacci retracement levels.

Here’s how the strategy works:

You want to see the price on an uptrend
Then you wait for a decline, they always happen at some point
Pick your Fibonacci tool and draw the levels from the low to the high of the move
When the price hits a Fibonacci level and prints a White Marubozu, that’s what you are waiting for
Go long when the price breaks the high of the White Marubozu
Set your stop loss and take profit levels, and expect a move to the upside

Strategy 6: Trading The White Marubozu With Pivot Points

Pivot Points are automatic support and resistance levels calculated using math formulas. If you are day trading, the Daily Pivot Points are the most popular, although the Weekly and Monthly are frequently used too.

Here’s how to trade the White Marubozu pattern with Pivot Points:

Activate the Pivot Points indicator on your charts
Check which Pivot Points are under the price, those will tend to work as a support
Ideally, you want to see the price on an uptrend, although is not required
Wait for a decline of the price to a Pivot Point level
At that level, you want to see a White Marubozu pattern appearing, meaning that the level is being rejected
Go long when the price breaks the high of the White Marubozu
Set your stop loss and take profit levels, and expect a move to the upside

Conclusion

Marubozu candlestick patterns are definitely a very useful trading signal due to their simplicity. However, like every other trading tool, it has its own flaws. The ability to predict price movement is not completely accurate owing to different charts and time frames. Even an amateur trader can identify a candlestick pattern on a chart but what matters is how effectively it is used in the trading strategy.