What Are Bullish And Bearish Harami Candles?
Key Questions Answered
- The Harami candlestick pattern is used to spot trend reversals.
- A Bullish Harami Candle is formed when there is a large bearish (red) candlestick, followed by a smaller bullish (green) candlestick that is within the range of the first candle.
- A Bearish Harami Candle is formed when there is a large bullish (green) candlestick, followed by a smaller bearish (red) candlestick that is within the range of the first candle.
What is a Harami Candle?
Harami candles are a type of candlestick pattern that can be used to predict future price movements in the market. It is considered to be a reversal pattern, which means that it can be used to signal a potential change in the direction of the market. As such, it is used by investors when making crypto buying or selling decisions.
The harami candlestick pattern is formed when the real body of one candlestick is completely engulfed by the real body of the previous candlestick, hence the name “harami” (Japanese for “pregnant”.) This pattern can occur in either an uptrend or a downtrend.
The key to identifying a harami candlestick pattern is to look for two things:
- The second candlestick must be smaller than the first, and
- The second candlestick’s real body must be entirely contained within the first candlestick’s real body.
How to Confirm Trend Reversal With Harami Candles
Once you have identified a potential harami candlestick pattern, you will want to wait for the market to confirm the reversal. The best way to do this is to wait for the next candlestick to close.
If the next candlestick is also a bullish candlestick, then this is a confirmation that the market has indeed reversed and is now moving in an uptrend. On the other hand, if the next candlestick is a bearish candlestick, then this is a confirmation that the market has indeed reversed and is now moving in a downtrend.
There are two types of Harami candlestick patterns – the Bearish Harami pattern and the Bullish Harami pattern.
Bullish Harami Candle Pattern
A Bullish Harami Candle
A Bullish Harami Candle pattern indicates a possible reversal from bearish to bullish momentum. It is created when there is a large bearish candlestick followed by a smaller bullish candlestick, with the latter having an open price that is within the range of the former’s body.
Bullish Harami patterns can have either short or long tails, and are considered more reliable when found in an oversold market. While not all reversals will result in significant price movements, traders will often use this pattern as an indication to enter into long positions.
Bearish Harami Candle Pattern
A Bearish Harami Candle
A Bearish Harami Candle is formed when the first candlestick is typically a long bullish (green) candle, while the second is a small bearish (red) candle that forms within the body of the first candle.
This pattern is considered bearish because it indicates that the bulls have lost control and the bears are beginning to take over. While the bearish harami is not as reliable as some other candlestick patterns, it can still be a useful tool for identifying potential reversals in an uptrend.
Just like the Bullish Harami pattern, after noticing this trend, you should look for a confirmation which will ideally show up as a bearish candlestick right after the Bearish Harami pattern. If you get a confirmation, this should trigger a sell signal which could be a sign for investors to pull out of the market.
What is a Harami Cross Candle?
The Harami Cross has a very small real body, almost like a Doji. This is important to qualify as a Harami cross–the smaller the real body, the better it is.
The absence of a real body after a strong move indicates that the previous trend is coming to an end, and a reversal may occur.
The Harami Cross pattern, just like the regular Harami pattern, is a candlestick pattern that can be a Bullish or Bearish trend reversal based on where it is positioned on the chart.
Several traders attach more importance to the Harami cross candle pattern compared to the regular Harami pattern. Just like the normal Harami patterns, there are also two types of Harami cross patterns–Bullish and Bearish.
4 Bullish Harami Cross Signs
Bullish Harami Cross
- Typically appears during a downward trend.
- Signals that the trend is moving from a downward trend to a neutral or upward trend.
- The first candle is a strong red body. This means that the red candle is distinguishingly large.
- The second candle resembles a green Bullish Doji; this means that it is shaped like a cross and is contained within the red candle before it and doesn’t go outside its range. It is shaped like a cross because the opening and ending happen at almost the same time.
4 Bearish Harami Cross Signs
Bearish Harami Cross
- Typically appears during an upward trend.
- Signals that the trend is moving from an upward trend to a neutral or downward trend.
- The first candle is a strong green body. This means that the green candle is distinguishingly large.
- The second candle resembles a red Bearish Doji; this means that it is shaped like a cross and is contained within the green candle before it and doesn’t go outside its range.
It is important that traders do not make buying or selling decisions based on the Harami candles alone, but instead look at previous trends, price actions and project-specific development/news, as well as understand the larger macro environment. Without all these additional pieces of information, it is too risky to depend solely on this one pattern to take a position.