Bullish And Bearish Harami Candlestick Patterns
Harami is one of the important candlestick patterns that warn of a potential trend reversal in the market. It is a two stick pattern meaning it takes two days for the Harami pattern to form. Harami is the Japanese for a pregnant woman. This pattern looks like a pregnant woman.
The first day candle in case of a bullish harami is bearish. The market is in a downtrend. The first day or what you call the setup day candle is large. On the second day or what you call the signal day, bulls enter the market and push the prices higher but with little success. Prices close lower than the open of the setup day and don't surpass the high of the setup day. When this pattern appears, it means bulls have become active again and are attempting to turn around the market.
When you think that you have spotted a bullish harami pattern, you should take a look at the candles formed on the setup day and the signal day. Setup day should have a large candle that is larger than the signal day candle. The setup day candle should have an open higher than the close.
The open on the signal day should be higher than the close of the candle on the setup day. The signal day candle should have a close higher than the open.
This is an important pattern that tells of a potential trend reversal. It has an important variation that is called the Harami Cross that has a Doji forming on the signal day.
When you trade this pattern, always try to place the stop at the close of the setup day. This way, if the pattern turns out to be false, you can get out of the market without much loss.
Article Source: FxTradingStock.com
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Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide.
by: Ahmad Hassam
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Date: Thu, 6 Jan 2011
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