What Is a Harami Candle? Example Charts Help You Interpret Trend Reversal

You’ll see how other members are doing it, share charts, share ideas and gain knowledge. Chart patterns, candle patterns, support and resistance levels, and other indicators should be used. Normally candles have upper and bottom wicks (vertical lines) and bodies (colored zone). The upper point is the highest price, while the bottom end is the lowest price.

This bullish harami, circled in red, appears as a reversal in a short term downtrend. What strikes me first about this picture is the wonderful
looking triple top chart pattern. The three peaks (1, 2, and 3)
beginning in February near the same price are bearish and price drops after the pattern completes, as predicted by the pattern.

The Art of Detecting Market Tops and Bottoms

A bullish harami, which is preceded by a downtrend and predicts that prices may reverse to the upside, is the polar opposite of a bearish harami. A bullish harami is a candlestick chart signal that indicates the end of a bearish trend. A bullish harami may be described by some investors as a signal to place a long position on an asset. The first Harami pattern shown on Chart 2 above of the E-mini Nasdaq 100 Future is a bullish reversal Harami. In the case above, Day 2 was a bullish candlestick, which made the bullish Harami look even more bullish.

• While not all reversals will result in significant price movements, traders will often use this pattern as an indication to enter into long positions.
• A Bullish Harami appearing after this bearish move is a sign of a possible reversal to the upside.
• We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere.
• There are two types of Harami candlestick patterns – the Bearish Harami pattern and the Bullish Harami pattern.

Once you have identified a potential harami candlestick pattern, you will want to wait for the market to confirm the reversal. The best way to do this is to wait for the next candlestick to close. As you can see, a harami candlestick pattern is made of two candle. A closer look shows that the two sticks have a close resemblance to a pregnant woman.

Exploring the Best Indicators in TA-Lib: Technical Analysis of Stocks using Python- Part 1

As you can see in the example, the market entered our position above the high and continued to rally further. This gives you a good chance to enter with the market momentum and push higher, as well as avoid a potential false or weak signal generated. You should be able to pick up these patterns and able to practice with them immediately as there is not much for you to analyse, to be honest.

The patterns are calculated every 10 minutes during the trading day using delayed daily data, so the pattern may not be visible on an Intraday chart. Another popular way of trading the Bullish Harami candlestick pattern is using the Fibonacci retracement tool. The Bullish Harami candlestick pattern is formed by two candles.

Bar Reversal Pattern

In terms of meaning, both patterns indicate that the price is about to reverse. The bullish harami candle pattern is a Japanese candlestick formation formed at the bottom of a bearish trend and indicates that the trend is about to reverse. One of the harami pattern variations is called the “harami cross.” It occurs when the second candle appears to be entirely empty. The level of this “cross” continues the trend presented by previous candles. The candle with wicks but without the body signals the drastic market activity drop. Due to the frequency of the candlestick pattern, the bullish harami pattern is a continuation or a bar reversal candlestick pattern of price movement that can occur in many markets.

Everything that you need to know about the Bullish Harami candlestick pattern is here. In a downtrend, it means that sellers have failed to close the second candlestick near the low of the previous candlestick. And here is another example where a bullish harami occurred, but the stoploss on the trade triggered a loss.

Technical Analysis

To trade the Bullish Harami candlestick pattern it’s not enough to simply find a pattern with the same shape on your charts. A bullish Harami occurs at the bottom of a downtrend when there is a large bearish red candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. Bullish Harami patterns can have either short or long tails, and are considered more reliable when found in an oversold market. While not all reversals will result in significant price movements, traders will often use this pattern as an indication to enter into long positions. In this example, the bullish harami functions as a bullish reversal of the downtrend when price breaks out upward. However,
overhead resistance setup by the prior two peaks stop the upward trust and price collapses again.

There are different opinions over the purpose of the harami candlestick pattern. Some read it as a trend reversal signal, while others don’t see it as a clear signal and prefer to wait for later developments or use other indicators to figure out how to act. Below, you can see how to identify the harami pattern on a trading chart.

Watch this video to learn more about how to identify and trade the bullish harm pattern. Our watch lists and alert signals are great for your trading education and learning experience. An internal Swing Trend indicator furthermore determines the current trend bias, user selectable as per deviation type and a multiplier setting. The bearish equivalent to this pattern is the Bearish Harami Cross. The first bar in the Bullish Harami Cross is a large body down-close whereas the second is a doji, contained within the large candle body.