Trading the Bullish Harami Pattern

Some traders may opt to enter positions once the harami cross appears. If entering long on a bullish harami cross, a stop loss can be placed below the doji low or below the low of the first candlestick. A possible place to enter the long is when the price moves above the open of the first candle. Using Fibonacci retracement levels in combination with a bullish harami pattern as a trading strategy could be tricky. You’ll have to identify the previous highs and lows of the previous trend to correctly draw Fibonacci levels and occasionally, you might even have to change a timeframe. Since the bullish harami is a trend reversal pattern, you want to confirm the reversal with another momentum indicator.

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Bullish Harami Bullish Mean Reversion Trade Setup

The bullish harami pattern and the engulfing reversal pattern are quite similar, especially in the outcome. They are both two candlestick patterns that appear at the end of a downward trend and signal that the trend is about to reverse. Bullish and bearish haramis are among a handful of basic candlestick patterns, including bullish and bearish crosses, evening stars, rising threes, and engulfing patterns.

• When the first candle of the bullish harami is formed, there is no sign of bullish market sentiment.
• Bullish and bearish haramis are among a handful of basic candlestick patterns, including bullish and bearish crosses, evening stars, rising threes, and engulfing patterns.
• With the pattern identified, traditional traders enter long on a break of the high of the second candle and place a stop loss below the low of the first bearish candle.
• Here is a chart below where the encircled candles depict a bullish harami pattern, but it is not.
• The high or low of a Harami cross setup provides resistance or support for any further price moves.

Investors looking to identify harami patterns must first look for daily market performance reported in candlestick charts. Being able to properly identify bullish candlestick patterns can help tell you when a security is about to reverse upwards, go long or take profits. This article explores what bullish candlestick patterns are and how you can use them to time your trades. Stock candlestick patterns provide valuable insights into a stock’s supply and demand dynamics, giving traders and investors a bird’s-eye view of current market sentiment.

What is a Harami Candle?

As the trend reversed put a stop loss at the bottom of the bullish harami. The risk-averse will initiate the trade the day near the close of the day after P2, provided it is a blue candle day, which in this case is. If entering a short, a stop loss can be placed above the high of the doji or above the high of the first candle. One possible place to enter the trade is when the price drops below the first candle open. If a candle following pattern’s appearance closes below the opening price of the second line (i.e. white candle), it is likely that a downtrend will be continued. Conversely, when a candle following the pattern closes above its second line, there is a chance that the downtrend will be stopped.

This pattern shows increasing buying pressure illustrated by the higher closing prices of the following candles. The candlestick pattern has smaller candlesticks suggesting that sellers and buyers are struggling for control. But the overall outlook indicates an uptrend, as shown by the appearance of a decisive larger bullish candle.

Example of a Harami Cross

As such, it is used by investors when making crypto buying or selling decisions. The bullish harami candlestick is a reversal structure but less potent than engulfing and piercing pattern. The bearish harami pattern appears at the top end of an uptrend, allowing the trader to initiate a short trade.

• The real body of the candle on Day 2 will be well within the real body of Day 1 candle.
• The default “Intraday” page shows patterns detected using delayed intraday data.
• The “More Data” widgets are also available from the Links column of the right side of the data table.
• Barchart Plus Members have 10 downloads per day, while Barchart Premier Members may download up to 250 .csv files per day.

The name “Harami” comes from Japanese and means pregnant due to the fact that the formation is similar in appearance to a pregnant woman. There are two types of Harami candle patterns, the bullish and bearish harami candlestick pattern. In other words, the bullish harami candlesticks pattern has a large bearish candle engulfing a small bullish candle. The word harami is a Japanese word for pregnant; outline of the pattern looks like a pregnant woman.

Multiple Candlestick Patterns (Part

If the candles leading up to the bearish harami are long and big compared to the other bars, you know that the market is quite strong and determined to move higher. When the first candle of the bullish harami is formed, there is no sign of bullish market sentiment. Just as before, selling pressure is high and pushes the market even lower. The long shadow indicates that though sellers were trying to push the price of the security lower, buyers are gaining strength. Despite the selling pressure, the small-bodied candle indicates that buyers have gained marginal strength over sellers.

Once again, the doji must be contained within the real body of the prior candle. A bullish harami is a two-candle bullish reversal pattern that forms after a downtrend. The first candle is bearish, and is followed by a small bullish candle that’s contained within the real body of the previous candle.

If bearish, it shows that sellers are losing strength since the size of the candlestick is smaller. This candlestick closes above the middle of the first long black body and indicates buyer intention to push prices higher. The longer bullish candlestick indicates that buyers have now taken over and are aggressively pushing the price of the security higher above the previous closing price. Some traders may consider entering a long position when the next candle opens higher than the close price of the engulfing candle. The bullish engulfing candlestick pattern and bullish harami patterns are almost identical but with their candles flipped. The only difference is that the second candle engulfs the first in the bullish engulfing, whereas the first candle engulfs the second in the case of the bullish harami.

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The first candlestick is referred to as the “mother” with a large real body that embodies the smaller second candlestick, and thus creating the visual of a pregnant mother. Analysts looking for fast ways to analyze daily market performance data will rely on patterns in candlestick charts to expedite understanding and decision-making. It is called a counterattack because the second (bullish) candle gaps down at the open but reverses upwards. This movement shows that while sellers tried to send the price of the security downwards, buyers regained strength and sent the prices higher.

Conversely, in an engulfing pattern, the second candle is larger than the first one. The above example shows that just two candles that look like a “harami pattern” does not mean the trend reverses. In early October, Goldman Sachs made a bullish harami that was not the start of a new trend. This pattern clearly reminds us to look for singnals when a pattern appears. Therefore, traders need to use some other method of determining when to exit a profitable trade. Some options include using a trailing stop loss, finding an exit with Fibonacci extensions or retracements, or using a risk/reward ratio.