Bullish Harami Candlestick: Definition, Formation, Trading

bullish harami candlestick pattern

It gives a bullish signal only after the price has broken above the high of the first candlestick. Below, we are going to show you how to confirm the bullish harami pattern and find good entry and exit levels by using the RSI, MACD, and Fibonacci ratios. Stops can be placed below the new low and traders can enter at the open of the candle following the completion of the Bullish Harami pattern. Since the Bullish Harami appears at the start of a potential uptrend, traders can include multiple target levels to ride out a new extended uptrend. These targets can be placed at recent levels of support and resistance.

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The entire body of the second candlestick must fall inside the body of the prior bearish candlestick for the pattern to form a bullish harami pattern. Using technical indicators along with the bullish harami candlestick pattern prevents incurring losses or limits the loss incurred. Yes, the bullish harami candlestick pattern is a bullish trend reversal indicator. The bullish harami candlestick signals trend reversals from a bearish trend to a bullish trend. The first step to using the bullish harami pattern to trade in the stock market is confirming the pattern on the stock price chart.

What Are the Key Factors to Consider When Trading with a Bullish Harami?

Secondly, the bullish harami candlestick pattern is made up of two candlesticks while the shooting star pattern consists of a single candlestick. There are three main advantages of bullish harami candlestick patterns. All the advantages primarily revolve around the ease of spotting and identifying the bullish harami candlestick. Its distinctive shape which resembles a pregnant woman aids in its quick identification.

Harami Candlestick – Bullish & Bearish Harami Pattern

One of them has sold 30,000 copies, a record for a financial book in Norway. The opposite of the Bullish Harami is the Bearish Harami and is found at the top of an uptrend. We’ve had some very good experiences with it in our other strategies. In this section of the article, we wanted to show you a couple of different approaches we use to improve the accuracy of different patterns.

How to Identify and Use the Bullish Harami Candlestick Pattern?

bullish harami candlestick pattern

Another popular way of trading the Bullish Harami candlestick pattern is using the Fibonacci retracement tool. The Bullish Harami pattern is also a mirrored version of the Bearish Harami candlestick pattern. With the real-life trading example, you’ve seen how to apply a bullish pattern strategically for profit. Always prioritise risk management, using stop-loss orders and disciplined plans to protect your capital. Identifying bullish patterns effectively requires practice and experience.

Just as before, selling pressure is high and pushes the market even lower. A candlestick chart typically represents the price data of stock on a single day, including opening price, closing price, high price, and low price. And if you had chosen to exit the market right after the three consecutive bearish candles, missing the big drop through the blue trend line, you would have kept most of your open profit.

As the name suggests, the bullish harami is a bullish pattern appearing at the bottom end of the chart. The bullish harami pattern evolves over a two day period, similar to the engulfing pattern. We identify a bearish and a bullish reversal Harami candlestick pattern, based on the two candles being bullish and bearish or bearish and bullish.

As a sign of changing momentum, the small bullish candle ‘gaps’ up to open near the mid-range of the previous candle. The bullish engulfing candlestick pattern and bullish harami patterns are almost identical but with their candles flipped. The only difference is that the second candle engulfs the first in the bullish engulfing, whereas the first candle engulfs the second in the case of the bullish harami. Engulfing means that one candle’s open and close fit within the real body of the engulfing candle.

To find a bullish RSI Divergence we want to see the price on a downtrend first, making lower lows and lower highs. The idea here is to trade pullbacks to the moving average when the price is on an uptrend. Since we are looking for moves to the upside, we want to trade the Bullish Harami using support levels. It is a must to remember that no pattern is infallible, and trading always involves risk of losing if the risk is not managed well.

The confirmation of the pattern implies that the bullish trend is exhausted and that a bearish activity might be on its way. Traders like to position into the bearish Harami candlestick pattern by opening short trades for catching a potential price decrease. Validating bullish candlestick patterns with other indicators can increase the reliability bullish harami candlestick pattern of your trading signals and reduce the risk of false signals. Other advantages of the bullish harami pattern include its ability to combine well with simple momentum-based technical indicators such as the MACD and the RSI. The bullish harami is also a pattern that frequently appears in price charts, making it easier to spot them.

Harami candlestick patterns indicate a trend reversal in the underlying market price of an asset. The Harami Japanese candlestick pattern can occur in both bullish and bearish markets, which means that the formation can be useful in any environment. A bullish Harami pattern indicates an upward price reversal, whereas the bearish Harami pattern indicates a downward price reversal may be possible. A Bullish Harami can be utilized in a trading strategy in several ways. One way is to use it as a potential reversal signal when the price pulls back to a support level in an uptrend. Another way is to use the Bullish Harami in combination with other technical indicators and chart patterns to confirm a potential trend reversal.

The bullish harami pattern can give false positive signals sometimes which could lead to losses if not used along with other technical indicators. The third main advantage of the bullish harami pattern is its ability to work well with different kinds of securities such as stocks, forex, indices etc. The bullish harami pattern is, thus, useful to a wide range of investors and traders across different security markets. There are primarily three steps to trading in the stock market using the bullish harami pattern. The first is the identification of the pattern, the second is the confirmation and the third step involves trading based on the signals produced by the pattern.

The bearish Harami pattern has the opposite setup and functions compared to the bullish Harami. A bearish Harami usually appears at the end of bullish trends and indicates a possible upcoming reversal. A bearish Harami starts with a long bullish candle and continues with a smaller bearish candle, with is fully engulfed by the first candle.

  1. Furthermore, most candle patterns will also suggest an entry point on the chart, as well as where to place a stop loss order.
  2. The candlestick pattern is considered a bullish harami if it fulfils these conditions.
  3. It is a very accurate signal, confirming a bearish to bullish reversal.
  4. It is a must to remember that no pattern is infallible, and trading always involves risk of losing if the risk is not managed well.
  5. We don’t just give traders a chance to earn, but we also teach them how.

This will limit potential losses if the pattern doesn’t work as expected. First, obtain a candlestick chart or any price chart representing the asset you want to analyse. You can use various charting platforms or financial websites to access these charts. You can see in the image below that the bullish candle has closed above the midline point of the previous bearish candle. A bullish marubozu is a candlestick with a long body and little to no wicks.

As such we may earn a commision when you make a purchase after following a link from our website. In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts. Fibonacci shows retracement levels where the price will tend to revert frequently. It’s simple, the Bullish Harami pattern is traded when the high of the last candle is broken.

bullish harami candlestick pattern

There are three main steps to keep in mind while identifying the bullish harami candlestick pattern in technical analysis. Firstly, investors and traders must look for the bullish harami at the end of a prolonged bearish trend. The bullish harami candlestick is always found a the end of a bearish trend and it signals a possible trend reversal. The image below represents the main steps in identifying bullish harami patterns. The third and final step to using the bullish harami pattern to trade in the stock market is entering the trade using the pattern signals.

The image shows that the first candlestick in a bullish harami pattern is a long bearish candlestick and the second is a short bullish candlestick. The entire body of the bullish candlestick must fall inside the body of the bearish candlestick. The second bullish candlestick must make a jump from the low of the previous bearish candlestick to open at a higher position.