With that said, we can see that the two patterns are a complete mirror of each other. The bullish harami pattern often forms when a downtrend or pullback phase is “exhausted”—meaning the bearish momentum driving prices lower is losing steam. You can also use pivot points to automatically identify potential key price levels to monitor.

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. The Japanese yen remains under pressure, trading near a five-month low against the US dollar.

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. Once a bullish harami formation is identified, traders can look to capitalize on the anticipated uptrend it forecasts by entering long positions. Two effective strategies using supporting indicators are employing MACD and RSI oscillators and applying Fibonacci levels. The strategic alignment of candles in the Harami Cross indicates a possible faltering in bearish momentum, potentially leading to an upward market correction.

Trading The Bullish Harami Pattern with Fibonacci Retracements

Fibonacci shows retracement levels where the price will tend to revert frequently. It’s simple, the Bullish Harami pattern is traded when the high of the last candle is broken. When trading the Bullish Harami, we want to see the price first going down, making a bearish move. Once the trade has been initiated, the trader will have to wait for either the target to be hit or the stop loss to be triggered. Nathalie Okde is an SEO content writer with nearly two years of experience, specializing in educational finance and trading content. Nathalie combines analytical thinking with a passion for writing to make complex financial topics accessible and engaging for readers.

1. The price continued lower for a couple of weeks before reversing and then breaking above the resistance level.
2. Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups.
3. It’s a reversal pattern because before the Bullish Harami appears we want to see the price going down, thus it’s also a frequent signal of the end of a trend.
4. The second candlestick is small and is contained within the body of the first candlestick.
5. A market analyst and member of the Research Team for the Arab region at XS.com, with diplomas in business management and market economics.
6. For Forex traders, mastering the Bullish Harami candlestick pattern can be a game changer, offering a clear signal to pinpoint market reversals.

How To Identify The Bullish Harami Candlestick Pattern

This is because, in general, two-candlestick patterns appear more frequently than three-candlestick patterns or higher. Additionally, the bullish harami has a relatively basic condition for its two candles to be considered valid. To effectively leverage the Bullish Harami setup, traders should also watch for a following bullish candle, confirming the trend reversal.

For example, when a bearish harami emerges during a retracement, a trader may use a 200-day moving average to confirm the market is in a long-term decline and enter a short position. When trading in financial markets, analyzing price movementsand predicting future trends is of vital importance. Whether trading in thestock market or the foreign exchange market, we commonly use Japanese candlestick patterns for financial analysis.

Bearish Harami Cross Signs

This long, full-bodied candle with little to no shadows demonstrates overwhelming buying pressure. After a Bullish Harami pattern appears, it typically indicates a potential reversal of a downtrend. This means that the bearish momentum may weaken, and there could be a shift towards a bullish trend.

Utilizing the Advance/Decline (A/D) strategy is a popular approach to analyzing candlestick patterns. A rising A/D bullish harami candlestick pattern index value is an indication of the market gaining momentum, whereas a falling value may suggest that the market is losing momentum. As an example of a live trading scenario, we chose to trade the Dow Jones Industrial Index (INDU). Both harami patterns begin with a long-ranged candle and end with a small second candle that is contained within the first. Additionally, both harami patterns signal trend reversals, albeit on opposite sides.

1. One such pattern that has gained recognition among market participants is the Harami candlestick pattern.
2. Enter a Bullish Harami trade cautiously, ideally after the next candlestick closes higher, confirming the reversal.
3. The Bullish Harami pattern is also a mirrored version of the Bearish Harami candlestick pattern.
4. Savvy traders often scout for this pattern to pinpoint strategic investment opportunities that align with emerging upward movements.
5. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts.

Yet, when the market gaps higher on the next bullish session that holds above the low, it can already become a viable trend reversal pattern. To identify a bullish harami on a chart, look for a long bearish candle followed by a short bullish candle. To make this easier, since the bullish harami candlestick is one of the trend reversal indicators, look for this pattern at the end of a prolonged bearish trend. To make a bearish harami pattern more useful as a trading signal, traders usually combine it with other technical indicators.

A Harami cross Pattern that indicates a bearish reversal is called a Bearish Harami Cross while a Harami Cross that indicates a bullish reversal is called a Bullish Harami Cross. However, you are rather advised against trading weak patterns, especially when they go against the prevailing trend. In this case, going against the trend would have been unwise, even though the pattern was below the trendline. Ideally, to increase the accuracy, we want to trade the Bullish Harami candlestick pattern by combining it with other types of technical analysis or indicators. A Harami candlestick pattern is identified by a small candle that is completely engulfed by the previous larger candle.

How to Trade Bullish Harami Candlestick Pattern (Technical Analysis)

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.

While the harami represents a gradual shift through its two-candle sequence, the engulfing signals a forceful, singular takeover. Even though they indicate similar market psychology, the smaller contained harami, and larger engulfing candle denote distinct formations that compose their notable bullish reversals. This comprehensive guide is designed to demystify the intricacies of trading with Bullish Harami candles. We’ll walk you through the steps of spotting the harami formation and crafting effective tactics to turn this knowledge into profit.

Like the Bullish Harami, the Bearish Harami pattern includes a small real body, or spinning top, within a long red or green body, which the Japanese call a harami, meaning “pregnant” in their language. However, in the Bearish Harami, the first candle is long, while the second is short. Additionally, the second real body is contained within the first real body, even if the shadow of the second candle is taller. To trade the Bullish Harami candlestick pattern it’s not enough to simply find a pattern with the same shape on your charts. Explore the bullish harami pattern, its definition, and effective trading strategies to spot trading opportunities. In Chart 2 above, a buy signal could be triggered when the day after the bullish Harami occurred, the price rose higher and closed above the downward resistance trendline.