Bulkowski’s White Marubozu

Written and copyright © 2008-2009 by Thomas N. Bulkowski. All rights reserved.

In my book, Encyclopedia of Candlestick Charts, pictured on the right, I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines in the tests.

The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines, performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators), and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy by clicking on the above link.

With the white marubozu candlestick, I am reminded of the story, "The Emperor's New Clothes" where the emperor did not wear any clothes. The white marubozu candle has no shadows! If you can call a candle naked, then maybe this is an example. It appears as a tall white blob on the charts, and it acts as a continuation 56% of the time. That type of performance is what I call near random.

Important Results

Theoretical performance: Continuation Tested performance: Continuation 56% of the time Frequency rank: 27 Overall performance rank: 71 Best percentage meeting price target: 79% (bear market, down breakout) Best average move in 10 days: -4.79% (bear market, down breakout) Best 10-day performance rank: 26 (bull market, down breakout) All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.

White Marubozu

Discussion

The white marubozu candlestick is a tall white candle with no shadows. It suggests a continuation of the existing price trend but only 56% of the time. Thus, be prepared for price to reverse direction before the breakout or soon thereafter. The frequency rank is high enough, 27, where 1 is the most popular, that you should have no trouble finding this candle in a historical price series. The overall price performance rank is a distant 71 where 1 is best. Thus, do not look for price to breakout and then make a huge move. That could happen but the odds are against it.

The best average move 10 days after a breakout belongs to a bear market where price drops 4.79%. I consider moves of 6% or more to be wonderful, so this falls short. The best performance rank is 26 and that occurs after a downward breakout in a bull market. I think that with many single candle lines, expecting a huge post breakout performance just isn’t in the cards.

Identification Guidelines

Three Trading Tidbits

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

1. White marubozu candles that appear within a third of the yearly low perform best -- page 547.
2. Patterns within a third of the yearly high act as continuations most often -- page 549.
3. Breakouts below the 50-trading moving average tend to work best -- page 549.

Example

This chart shows an example of a white marubozu candlestick at A. The candle is taller than recent ones, it is white, and it has no shadows. That qualifies it as a white marubozu.

This white marubozu appears just after price reverses from down to up. The upturn is not a long one. It lasts just one more day after the white marubozu before pausing and forming a tweezers top candle pattern (two candles sharing the same high price).

The breakout from the white marubozu is upward when price the next day closes above the marubozu. Thus, the candle line acts as a continuation of the brief upward trend already in progress.

Notice how smooth the price trend was on this chart until after the white marubozu candlestick. Such choppy price action in mid June would alert me to a potential problem with the stock. I would avoid trading it for that reason -- at least until it settled down.

-- Thomas Bulkowski