Bullish and Bearish Harami Candlestick Pattern
Now, let us learn how a Harami candlestick pattern is formed that can be either bullish or bearish.
What are Bullish and Bearish Harami Candlestick Patterns?
The term Harami means “pregnant” in Japanese. A Bullish Harami is formed when a large bearish candle appears on Day 1 that is followed by a smaller bullish candle on the next day. An important aspect of the bullish Harami is that prices should gap up on Day 2 so that price is held up by the buyers and is unable to fall to the bearish close of Day 1.
A Bearish Harami is formed when there is a large bullish candle on Day 1 and is followed by a smaller bearish candle on Day 2. An important aspect of the bearish Harami is that prices should gap down on Day 2.
The real body of the candle on Day 2 will be well within the real body of Day 1 candle. The 1st candle will always be the colour of the prior trend and the second candle will be the reversal candle.
What is the psychology behind the pattern?
Bullish Harami Pattern:
As the strong downtrend is going on the prices keep making lower lows. As the market moves down a long-bodied bearish candle is formed on the first day of this candlestick pattern as per the expectations of the bears. On the second day, the prices open gap up which shows that the bulls are back in action and exerting buying pressure. The bulls try to push up the prices and they try to close above the opening price. But the closing should be below the opening price of the prior day’s candle.
Bearish Harami Pattern:
As the strong uptrend is going on the prices keep making higher highs. As the market moves up a long-bodied bullish candle is formed on the first day of this candlestick pattern as per the expectations of the bulls. On the second day, the prices open gap down which shows that the bears are back in action and exerting selling pressure. The bears try to push down the prices and they try to close below the opening price. But the closing should be above the opening price of the prior day’s candle. Learn how to boost your trades by automating with candlestick patterns now!
Confirmation
As we know all candlestick patterns need a confirmation . In case of a Bullish Harami pattern, we get a confirmation on the third candle. The third candle should be bullish. A probable trade set up can be initiated if the third candle crosses the 1st candles’s high keeping stoploss at the 1st candle’s low. A trader must keep in mind other technical parameters to initiate the trade.
In case of a Bearish Harami pattern also, we get a confirmation on the third candle. The third candle should be bearish. A probable trade set up can be initiated if the third candle crosses the 1st candles’s low keeping stoploss at the 1st candle’s high.
