HARAMI

Harami is a Japanese candlestick pattern that indicates a potential trend reversal. The pattern consists of two candlesticks, where the first candlestick is larger and has a long body, and the second candlestick is smaller and has a short body, which is completely engulfed within the body of the first candlestick.

The second candle will have a Gaps at higher or lower. This gap makes different while compare to other candlesticks.

In stock markets, it's common to see candlesticks opening with a gap up or down, where the opening price is significantly different from the previous day's closing price.

The name, “Harami”, comes from the Japanese word ‘pregnant’. The formation of the 2 candles looks like pregnant woman. Where large candle looks like women carries the baby small candle inside her.
There are two types in Harami pattern

  1. Bullish Harami pattern

    A bullish harami pattern occurs when the first candlestick is a long bearish candlestick, and the second candlestick is a small bullish candlestick that is entirely contained within the range of the first candlestick.

    A bullish harami pattern can form during a downtrend in the market when sellers are in control. The first candle is a big red candle that makes a new low, reinforcing the sellers' position.

    The second candle opens higher than the previous candle's close, which surprises the sellers who expected a lower opening price. However, the market eventually closes below the previous candle's high, forming a small bullish candlestick.

    This small bullish candlestick signals that buyers may be gaining strength, and we can expect the next candle to be a bullish candlestick. This suggests a potential trend reversal from bearish to bullish.

    • The bullish Harami candlestick pattern is formed at the bottom of a downtrend and signals a potential trend reversal to an uptrend.
    • The pattern consists of two candles, with the first candle being large and red, and the second candle being small and green.
    • After the green candle, the market may retrace back to the same level for price correction.
    • It's important to wait for the confirmation of the next candlestick pattern before entering a trade.

  2. Bearish Harami pattern

    The Bearish Harami pattern is the opposite of the Bullish Harami pattern, formed at the top of the uptrend.

    A bearish harami pattern occurs when the first candlestick is a long bullish candlestick, and the second candlestick is a small bearish candlestick that is completely engulfed within the range of the first candlestick.

    A bearish Harami pattern can form during an uptrend when buyers are in control. The first candle is a large green candlestick, indicating buyers' strength.

    The second candle opens lower than the previous candle's close, which surprises the buyers who expected a higher opening price. However, the market eventually closes above the previous candle's open, forming a small bearish candlestick.

    This small bearish candlestick suggests that buyers may be losing strength and taking a pause in adding stocks. Sellers may be gaining strength, and we can expect the next candle to be a bearish candlestick

    • This pattern signals a potential trend reversal from bullish to bearish.
    • The pattern involves two candles, the first candle has to be large Green candle and The second candle should be red
    • After bearish action, most of the time, market retraces back to same level for the price correction

While Harami patterns can indicate a potential trend reversal, they are not always reliable, and traders should look for confirmation from other indicators before entering a trade.

Example-1 : Harami patterns

Example-2 : Bullish Harami with target and stoploss

Example-3 : Formation of Bearish Harami at Resistance zone

Example-4 : Formation of Bearish Harami at trend line

Example-5 : Bearish Harami making triple top

Example-6 : Bullish Harami with RSI divergence

Example-7 : Bullish and Bearish Harami

Example-8 : Bullish Harami making double bottom and support zone



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