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To see the performance of the pattern in your stock exchange in the context of other stock markets please examine the table below. Find your stock market there and see how it ranks among the others. This will give you an idea about the pattern’s strength and reliability and help you in your buying decisions.
BULLISH HARAMI CROSS
Definition
This is a major bullish reversal pattern, which is even more significant than a regular Bullish Harami. The outline again looks like a pregnant woman, as with the Bullish Harami Pattern. However, now the baby is a Doji. Basically, the pattern is characterized by a black body followed by a Doji that is completely inside the range of the prior black body.
Recognition Criteria
1. The market is characterized by a prevailing downtrend.
2. A black body is observed on the first day.
3. The Doji that is formed on the second day is completely engulfed by the body of the first day.
Pattern Requirements and Flexibility
The Bullish Harami Cross consists of two candlesticks, in which the body of the first black candlestick engulfs the body of the following Doji. The body of the first candlestick may be short.
Trader’s Behavior
A bearish mood prevails in the market, and a downtrend is in progress. The first day’s candlestick is a black body, which further supports bearishness. However the next day, prices open higher than the close, or at the close of the preceding day. The short traders are alarmed which leads to the covering of many short positions, causing the price to rise further. Moreover, the day closes at the opening price, showing lack of decision among traders. The increasing level of indecision and uncertainty amplifies the likelihood of a trend change and cause a reversal.
Buy/Stop Loss Levels
In the Bullish Harami Cross pattern the first candlestick can be short. This causes the confirmation level to change with respect to the body length of the first candlestick:
1. If the first black body is short, then the confirmation level will be defined as the body top of the first candlestick.
2. If the first black body is not short, then the confirmation level will the last close or the midpoint of the black body of the first candlestick, whichever is higher.
Prices should cross above these levels for confirmation.
The stop loss level is defined as the lower of the last two lows. Following the BUY, if prices go down instead of going up, and close or make two consecutive daily lows below the stop loss level, while no bearish pattern is detected, then the stop loss is triggered.