What is Harami Candlestick Pattern: Bullish and Bearish Harami Candlestick

Harami Candlestick Pattern: Bullish and Bearish Explained

The Harami candlestick pattern is a two-candle pattern used in technical analysis to signal potential market reversals. The term "Harami" means "pregnant" in Japanese, reflecting how the second smaller candle is contained within the body of the first larger candle.

What is a Harami Pattern?

A Harami pattern appears during a trend and suggests that the ongoing momentum may be weakening. It is characterized by a large candle followed by a smaller candle that is completely within the body of the first one. This pattern can be either bullish or bearish.

Types of Harami Patterns

1. Bullish Harami Pattern

This pattern forms during a downtrend and may signal a potential upward reversal. The first candle is a long bearish (red) candle, followed by a smaller bullish (green) candle that is completely within the previous candle's body.

Key Characteristics:

• Occurs after a downtrend
• Second candle opens higher and closes higher
• Indicates buyers are starting to enter the market

2. Bearish Harami Pattern

This pattern appears during an uptrend and may indicate a potential downward reversal. The first candle is a long bullish (green) candle, followed by a smaller bearish (red) candle inside the previous candle's body.

Key Characteristics:

• Occurs after an uptrend
• Second candle opens lower and closes lower
• Indicates weakening buying pressure

Harami Pattern Chart Example

Here is a visual representation of both Bullish and Bearish Harami patterns:

Trading Strategy with Harami Patterns

1. Identify the existing trend.
2. Spot a Harami pattern near support or resistance zones.
3. Confirm the reversal using volume or indicators like RSI or MACD.
4. Place a stop-loss below/above the pattern low/high.
5. Set targets using recent swing highs/lows or risk-reward ratios.

Tips for Effective Use

• Use Harami patterns with confirmation candles or indicators.
• More reliable on higher timeframes (daily, weekly).
• Combine with trendlines, moving averages, or support/resistance levels for stronger signals.

Conclusion

The Harami candlestick pattern is a simple yet effective tool for spotting trend reversals in the stock market. Whether bullish or bearish, it helps traders anticipate market shifts and make informed trading decisions.