Bullish Harami Candlestick Pattern What Is And How To Trade

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. It’s important to pay attention to where the bullish harami formation takes place before taking a trade. In the picture above, the formation occurred on a daily chart of $AMZN near previous highs. Note that the line across the top of the previous high formed the top of the cup of a cup and handle.

1. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.
2. Yes, the bullish harami candlestick pattern is profitable, especially when used along with other technical indicators.
3. Traders would enter a long position as the price breaks above the high of the bullish candle.
4. If you’re looking for a platform that offers all of these features, Morpher is a great choice.
5. Upside extension levels from the smaller bullish candle reveal logical take-profit areas.
6. Investors and traders can easily identify the bullish harami pattern on a price chart using its unique shape that resembles a pregnant woman.

Disadvantages of Trading on the Bullish Harami Pattern

In a downtrend, it means that sellers have failed to close the second candlestick near the low of the previous candlestick. In an uptrend, it means that buyers have failed to follow up on the surge of activity and close the second candlestick at or near the high of the previous candlestick. The Harami pattern consists of two candlesticks with the first candlestick being a large candlestick and the second being a small candlestick whose body is contained within the first candle’s body. My book,Encyclopedia of Candlestick Charts,pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

However, for the pattern to be valid, it must either occur in an existing downtrend that is actively making lower lows or during the pullback phase (a temporary market decline) of an uptrend. Both the bullish harami and tweezer bottom patterns are used to signal bullish trend reversals. However, unlike the standard bullish harami where the second candle is contained within the first candle, the tweezer bottom pattern consists of two candles with identical lows. During the second low of the double bottom pattern, a bullish harami pattern appears.

If you’re looking for a platform that offers all of these features, Morpher is a great choice. On April 16th, a perfect Bearish Harami Pattern formed, indicating the commencement of a new downward trend. It’s worth noting that the pattern formed above the trendline, suggesting that the market might be overextended. Conversely, if the Bearish Harami pattern had formed below the trendline, it would not have been as strong an indicator. Since we are looking for moves to the upside, we want to trade the Bullish Harami using support levels. 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.

The reliability and accuracy of the bullish harami pattern are not dependable when it is used in isolation as there are chances of false positives. The Bullish Harami suggests a potential reversal from a downtrend to an uptrend. It implies that the selling pressure is weakening and buyers are starting to take control. Although it is considered a bullish signal, its reliability increases when confirmed by additional indicators or price movements, such as higher trading volumes or subsequent bullish candles. That said, compared to standard bullish harami patterns, the variant’s second candle—resembling a cross—represents a state of price equilibrium or indecision regarding the future price direction. Nevertheless, this variant still signals a potential reversal, as it also abruptly halts the prevailing downward price trajectory.

1. Investors looking to identify harami patterns must first look for daily market performance reported in candlestick charts.
2. Between a Bearish Harami and a Doji, the Bearish Harami generally indicates a stronger bearish sentiment.
3. The following chart of the American Express Company shows the significance of the Bearish Harami Cross Pattern.
4. We know that you’ll walk away from a stronger, more confident, and street-wise trader.
5. Incorporating this strategy into your trading toolkit can enhance decision-making, leading to more informed and potentially profitable trades.

Investors looking to identify harami patterns must first look for daily market performance reported in candlestick charts. The bullish harami pattern signifies that a trend reversal is about to take place to the bullish side of a security. They are two candlestick reversal patterns found near downtrends and support levels. They typically take place at the bottom of downtrends and signal a reversal.

The Detailed Candlestick Patterns Cheat Sheet

A decreasing volume confirms a weakening bearish trend whereas an increasing volume confirms a weakening bullish trend. Some other indicators like MACD or RSI can be used for further confirmation. 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.

Bullish Harami vs. Bullish Engulfing Pattern

The first candlestick in the pattern is bullish and has a large real body. The second candlestick in the pattern is a Doji that is confirming the pattern. Following the bearish indication, the stock price started to fall and found some support only around $42. Bearish Harami is exactly the opposite of the Bullish Harami pattern as it indicates a bearish reversal.

While hunting for candlestick patterns, it’s worth noting that volatile markets provide a plethora of bullish harami candle highs and lows, making it an ideal hunting ground for you. In this scenario on the Shopify chart, the market has been in a general downtrend, which temporarily reversed in March of 2021. However, as the market is still in a bigger downtrend, the reversal may have been just a quick retracement.

The third and final step to using the bullish harami pattern to trade in the stock market is entering the trade using the pattern signals. The confirmation candlestick which is usually the fourth or third candlestick in the bullish harami pattern is considered the best time to enter the trade. Investors and traders must aim to enter the trade just before the confirmation candlestick closes to maximize their returns.

In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts. Again, the most important aspect of the bullish Harami is that prices gapped up on Day 2 and the price was held up and unable to move lower back to the bearish close of Day 1.

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However, the Know Sure Thing indicator broke the line in a bullish direction and had not yet confirmed a retracement. You should be aware that this indicator lags behind, so waiting for confirmation of the trend is advised. Harami patterns, being only two-candle patterns, provide limited information about market sentiment.