TWO CANDLESTICKS REVERSAL PATTERN : HARAMI

Nature – It’s a two candlestick reversal pattern and represents indecision. It can signal both bullish or bearish reversal patterns depending upon its position, preceding price action and further confirmation.

Position – It occurs at the top of uptrend for bearish Harami and bottom of downtrend for bullish Harami.

First Candle – First candle has  large body with either color (green or red color). Most of the time it would have green color,  which continues the up trend in case of bearish Harami and red color, which continues the downtrend in case of bullish Harami.

Second candle – It has small real body of either color (green or red), with or without upper and/or lower shadow.

Second candle contained within the real body of  first candle and said to be in Harami position.

Any combination of color can form Harami , but the most bearish Harami are one with red/green or red/red combination. But after an advance, red/green or red/red bearish harami are not as common as green/red or green/green Harami variations.

Similarly,  most bullish Harami are one with green/red or green/green combination. But after a decline, green/red or green/green combination are not as common as red/green, red/red one.

 

Bearish Harami Set up – It occurs at the top of an uptrend.

Confirmation of Set up – Price trading below the low of two candlestick pattern for aggressive traders and price closes below the low of the two candlestick pattern for conservative traders.

Bullish Harami Set up – It occurs at the bottom of downtrend.

Confirmation of Set up – Price trading above the high of two candlestick pattern for aggressive traders and price closes above the high of the two candlestick pattern for conservative traders.

 

 

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