Bullish Harami

The harami candlestick pattern consists of a small real body that is contained within the preceding large candles’ real body. After a decline, the hammer’s intraday low indicates that selling pressure remains. However, the strong close shows that buyers are starting to become active again. In other words, the body of the second candlestick is ‘pregnant’ within the body of the first. By recognizing the bullish harami pattern, traders can position themselves to take advantage of potential uptrends in the market. In this article, I will review chart patterns, discuss how to identify them, incorporate them with other technical analysis tools, and cover confirmation and trading.

Conversely, if the candles leading up to the pattern are small and insignificant compared to other candles, that’s a sign that the trend is weak and might break more easily. For example, in some markets one day of the week or one-third of the month might be extra bullish or bearish. However, when the market opens the next day, it does so with a positive gap. The bears seem to have lost the lead overnight, and given the bulls a chance to revert the trend. Finance content writer with 7+ years of experience in writing & editing website content. This article represents the opinion of the Companies operating under the FXOpen brand only.

• The first candle, appearing at the end of a downtrend, is a large bearish candle.
• If the price moves in your favor, follow the retracement with the Fibonacci levels.
• For example, if the volume of the bearish candle is very high, it might indicate a final blowoff, as we talked about before.
• The following example will show you how you can combine the Harami setup with extra price action setups.
• Initially, we aim for a price move equal to the size of the pattern.

We’ve explored its meaning, and showed you how you could improve the pattern by using different filters. In addition to that, we’ve also covered a couple of example trading strategies. As mentioned above, the bullish harami is characterised by a long bearish candlestick, followed by a small green one that is completely engulfed by the former. This formation indicates that the bears are losing control and that the bulls are starting to take charge, potentially leading to a trend reversal from a downtrend to an uptrend.

Morning Star

The bullish harami is considered to be a reliable setup for identifying potential trend reversal from down to up. However, like all technical analysis patterns, it can’t provide 100% accurate signals, so traders confirm it with technical indicators or other patterns before making a trading decision. No, a bullish harami candlestick is not similar to a shooting star candlestick. Firstly, a bullish harami candlestick is a bullish trend reversal indicator whereas the shooting star is a bearish trend reversal indicator. Secondly, the bullish harami candlestick pattern is made up of two candlesticks while the shooting star pattern consists of a single candlestick. Using technical indicators along with the bullish harami candlestick pattern prevents incurring losses or limits the loss incurred.

Traders use different analysis techniques to identify potential price moves and tradable opportunities. Forex analysis includes the study of different on-chart patterns, which contain price information. One of the most popular pattern groups are the Japanese candlestick patterns, of which the Harami formation is apart of.

Potential Pitfalls and Common Mistakes When Trading Bullish Harami

Now, another way of gauging the accuracy of a bullish harami is to compare the range of the pattern itself to surrounding candles. The bullish harami belongs to the category of most popular candlestick patterns and is relied upon by many traders in their analysis of the markets. In technical analysis, Bullish Harami candle is known as a preferred signal, having high accuracy in catching the big uptrend of prices. Today, Mr. Joker will help you clarify everything about this special candlestick pattern. One of the main advantages of the bullish harami pattern is the ease of spotting it on a price chart.

Requires Confirmation From Other Indicators or Patterns for Reliability

A bullish reversal candlestick pattern signals a potential change from a downtrend to an uptrend. It’s a hint that the market’s sentiment might be shifting from selling to buying. Since the bullish harami is a trend reversal pattern, you want to confirm the reversal with another momentum indicator. The MACD and RSI are two of the most important momentum indicators that you can use when identifying the bullish harami pattern. The Bullish Harami pattern can provide valuable insights into potential market reversals.

On the price chart, the Bullish Harami candle usually appears at the end of downtrends, signaling a future rise in prices. Recently, we discussed the general history of candlesticks and their patterns in a prior post. We also have a great tutorial on the most reliable bullish patterns. This time, we will combine the Harami candle chart pattern with an exponential moving average and Fibonacci levels. In addition, with the next two red candles we confirm a Three Black Crows candle pattern, shown in the green circle.

What Is a Bullish Harami?

To be considered a bullish reversal, there should be an existing downtrend to reverse. A bullish engulfing at new highs can hardly be considered a bullish reversal pattern. Such formations would indicate continued bullish harami definition buying pressure and could be considered a continuation pattern. In the Ciena example below, the pattern in the red oval looks like a bullish engulfing, but formed near resistance after about a 30 point advance.

Another important indicator is the Fibonacci retracement, which can help identify key levels of support. Look for bullish reversals at support levels to increase robustness. Support levels can be identified with moving averages, previous reaction lows, trend lines or Fibonacci retracements. The piercing pattern is made up of two candlesticks, the first black and the second white. Both candlesticks should have fairly large bodies and the shadows are usually, but not necessarily, small or nonexistent.

What Types of Market Conditions Are Best Suited for a Bullish Harami?

Ideally, there should be high volume during the formation of the bearish candle and lower volume during the bullish candle formation. A high trading volume during the formation of the bearish candle, followed by a decreased volume during the formation of the bullish candle, can reinforce the Harami pattern. This shift indicates that sellers are losing control and buyers are preparing to take over. The second (bullish) candle opens at a lower price and closes higher, within the range of the preceding bearish candle. The following example will show you how you can combine the Harami setup with extra price action setups.

By analyzing the convergence of Harami patterns with Support and Resistance levels, you can enhance the accuracy of your market predictions and optimize your trading strategies. Graphical symbols that display market sentiment are called Chart Patterns. These are useful in confirming the signals given by Harami patterns. During the rest of the day selling pressure tries to push the market lower, but buyers are there each time to prevent the market from heading lower. The bulls even manage to push prices a little higher, albeit not above the open of the previous bar.