BEARISH HARAMI CROSS
Definition
This is a significant bearish reversal pattern, surpassing the importance of a standard Bearish Harami. The pattern’s appearance is reminiscent of a Bearish Harami, resembling a pregnant woman. However, in this case, the "baby" is a Doji. Essentially, the pattern is characterized by a large white candlestick followed by a Doji that lies entirely within the range of the preceding bullish candlestick.
Recognition Criteria
1. The market is currently defined by a dominant upward trend.
2. A white 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 Bearish Harami Cross comprises two candlesticks, where the body of the first white candlestick engulfs the body of the subsequent Doji. The body of the first candlestick can be relatively short.
Trader’s Behavior
The market is currently exhibiting a bullish sentiment, with an ongoing uptrend. The first day’s candlestick is a white body, further reinforcing the bullish outlook. However, the following day, prices open lower than the previous day’s close, or at the same level. Worse still, the market closes at the same price as it opened, indicating indecision and signaling a potential uptrend reversal.
Sell/Stop-Loss Levels
In the Bearish Harami Cross pattern the first line can be a short candlestick. This causes the confirmation level to change with respect to the body length of the first candlestick:
1. If the first white candlestick has a short body, then the confirmation level will be at the bottom of the body of the first candlestick.
2. If the first white body is not short, then the confirmation level will be defined as the last close or the midpoint of the white body of the first candlestick, whichever is lower.
For confirmation, prices should drop below these levels.
The stop-loss level is defined as the higher of the last two highs. Following the bearish signal, if prices rise instead of falling and either close above or make two consecutive daily highs above the stop-loss level, without detecting any bullish pattern, the stop-loss is triggered.