Definition: Get the highest rated stock from Americanbulls for this pattern >>>
Bearish Harami Pattern is a two-candlestick pattern
composed of a small black real body contained within
a prior relatively long white real body. “Harami”
is an old Japanese word for “pregnant”.
The long white candlestick is “the mother”
and the small candlestick is “the baby”.
Recognition Criteria:
1. Market is characterized by an uptrend.
2. We see a long white candlestick on the first day.
3. Then we see a black candlestick on the second day whose
real body is completely engulfed by the real body of the
first day. The shadows (high/low) of the second candlestick
do not have to be contained within the first body, though
it's preferable if they are.
Explanation:
The Bearish Harami Pattern is a sign of a disparity
about the market’s health. Bull market continues
further confirmed by the long white real body’s
vitality but then we see the small black real body which
shows some uncertainty. This shows the bulls’
upward drive has weakened and now a trend reversal is
possible.
Important Factors:
It is important that the second day black candlestick
has a minute real body relative to the prior candlestick
and that this small body is inside the larger one. The
Bearish Harami Pattern does not necessarily mean a market
reversal. It rather predicts that the market may not
continue with its previous uptrend. There are however
some instances in which the Bearish Harami Pattern can
warn of a significant trend change - especially at market
tops.
A confirmation of the reversal on the third day is
required to be sure that the uptrend has reversed. This
confirmation may be in the form of a black candlestick,
a large gap down or a lower close on the next trading
day (the third day).
