BULLISH HARAMI CROSS
Definition
This is a significant bullish reversal pattern, even more noteworthy than the regular Bullish Harami. The pattern’s outline resembles a pregnant woman, much like the Bullish Harami Pattern. In this case, however, the "baby" is a Doji. Essentially, the pattern consists of a black candlestick followed by a Doji that is entirely within the range of the preceding black body.
Recognition Criteria
1. The market is currently defined by a dominant downward trend.
2. On the first day, a black candlestick is observed.
3. The Doji formed on the second day is completely engulfed by the body of the black candlestick from the first day.
Pattern Requirements and Flexibility
The Bullish Harami Cross comprises two candlesticks: a black candlestick whose body completely engulfs the body of the following Doji. The body of the first candlestick can be short.
Trader’s Behavior
The market is currently dominated by a bearish sentiment, and a downtrend is underway. The first day features a black candlestick, reinforcing the bearish outlook. However, the following day, prices open higher than the previous day’s close or at the same level. This alarms short traders, leading to the covering of many short positions and causing prices to rise further. Additionally, the day ends at the opening price, indicating a lack of decisiveness among traders. The growing indecision and uncertainty increase the probability of a trend reversal.
Buy/Stop-Loss Levels
In the Bullish Harami Cross pattern, the first candlestick can be relatively short. This affects the confirmation level, which varies according to the body length of the initial candlestick:
1. If the first black candlestick has a short body, the confirmation level is set at the top of the first candlestick’s body.
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.
3. For confirmation, prices must exceed these levels.
The stop-loss level is established as the lower of the last two lows. After a BUY signal, the stop-loss is triggered if prices decline instead of rising and either close below the stop-loss level or record two consecutive daily lows below it, without any bearish pattern being detected.