Additionally, both harami patterns signal trend reversals, albeit on opposite sides. Yet, while the pattern seemed promising as it was also followed by a long bullish candlestick, it abruptly lost momentum and now moves sideways with no clear trend direction. This serves as a reminder that the market can move unpredictably, and we cannot perfectly forecast where the price will go, making proper trade management essential. Once you have identified a potential harami candlestick pattern, you will want to wait for the market to confirm the reversal.

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We love the diversity of people, just like we like diversity in trading styles. There are mainly three types of Harami Patterns which are Bullish Harami Pattern, Bearish Harami Pattern, and, Harami Crosses. What IS important is the location of the Harami within an existing trend and the direction of that trend. A Bullish Harami appearing after this bearish move is a sign of a possible reversal to the upside. What makes a pattern valid is not just the shape, but also the location where it appears.

1. However, other techniques can be used simultaneously to determine the optimal exit strategy.
2. However, the candle closed below this line, indicating that it did not break out.
3. Moreover, the A/D index began to decline once the candle had closed, providing further confirmation that the trend may have reversed.
4. As the name says the Bullish Harami is a bullish reversal pattern meaning that the falling price may stop and change its direction.
5. For a bullish harami to appear, a smaller body on the subsequent doji will close higher within the body of the previous day’s candle, signaling a greater likelihood that a reversal will occur.

To further understand the Bearish Harami Pattern, let’s take an example of the Citigroup chart below. The stock was recovering from an earlier drop when a Bearish Harami Pattern emerged around $58.50. The first candlestick in the pattern is bullish and it has a large real body. The second candlestick is small and is contained within the body of the first candlestick.

1. Its body and high and low shadows should be entirely contained within the first candlestick.
2. While not the strongest trend reversal indicator, the standardized structure of the bullish harami candlestick and clean containment relationship help identify possible curve points ahead of confirmation.
3. The second candle gaps higher on the next day’s open and prints a small candle contained inside the first candle.
4. You can use the bullish harami candlestick pattern on bare candlestick charts with no other technical analysis tools except for the price chart itself.
5. The image above shows that the bullish harami signals a trend reversal from a bearish trend to a bullish trend.
6. A bullish harami pattern consists of two candlesticks that form near support levels where the second candle fits inside the larger first bearish candle.
7. Just like the Bullish Harami pattern, after noticing this trend, you should look for a confirmation which will ideally show up as a bearish candlestick right after the Bearish Harami pattern.

According to the book Encyclopedia of Candlestick Charts by Thomas Bulkowski, the Evening Star Candlestick is one of the most reliable of the candlestick indicators. It is a bearish reversal pattern occurring at the top of an uptrend that has a 72% chance of accurately predicting a downtrend. The Harami Candlestick Pattern is considered a trend reversal pattern that can either be bullish or bearish, depending on the direction of the price action.

Multiple Candlestick Patterns (Part

The bullish harami is a reliable bullish reversal pattern that’s found near downtrends or support levels. Patterns do fail, and it all depends on how strong the harami formation is and where it is found. If the next candlestick is also a bullish candlestick, then this is a confirmation that the market has indeed reversed and is now moving in an uptrend. On the other hand, if the next candlestick is a bearish candlestick, then this is a confirmation that the market has indeed reversed and is now moving in a downtrend. Certain techniques can aid the harami cross pattern and hopefully reduce the risk-reward of the investment.

That means you probably can’t guess the breakout direction withany accuracy. The frequency rank is 25, which means the candle pattern should be plentiful in a historical price series. However, the subsequent small bullish candle, entirely engulfed by the previous candle, suggests a waning of bearish dominance.

Another key advantage of the bullish harami candlestick pattern is its comprehensibility. Being an easy pattern to both identify and understand, this pattern is highly useful to beginners as well as advanced traders. The trend reversal that the bullish harami signals is simple and can be understood by all.

The image below shows a trend confirming candlestick in a bullish harami pattern. The image shows that the first candlestick in a bullish harami pattern is a long bearish candlestick and the second is a short bullish candlestick. The entire body of the bullish candlestick must fall inside the body of the bearish candlestick. The second bullish candlestick must make a jump from the low of the previous bearish candlestick to open at a higher position. The candlestick pattern is considered a bullish bullish harami candle harami if it fulfils these conditions. It is a candlestick chart formation that indicates a potential reversal from a down to an uptrend.

What is the ideal time to trade utilizing the Bullish Harami Candlestick Pattern?

Following the bullish signal, the stock made a significant recovery towards $200. The price of the stock was falling until a Bullish Harami Pattern appeared at the bottom. The first candlestick in the pattern has a large red real body while the second candlestick is small and its opening and closing are contained within the body of the first candlestick. The pattern indicated a bullish reversal and soon after the stock price started to recover.

Trading the Bullish Harami pattern on naked charts means you’re focusing solely on price action without using any indicators or technical tools. Trading the Bullish Harami candlestick pattern can be a game-changer if you know how to spot and confirm it correctly. Understanding this pattern can help your technical analysis while trading to increase profit and limit risks. Each day our team does live streaming where we focus on real-time group mentoring, coaching, and stock training.

On the 13th of October, the market provided a small red body preceding a long green candle, indicating a Bearish Harami Pattern. Moreover, the A/D index began to decline once the candle had closed, providing further confirmation that the trend may have reversed. Subsequently, it was recommended to take a short position with a stop loss, in case the pattern did not confirm. Fortunately, the short position proved to be fruitful, yielding almost 10% profit by the end of the month.