Bullish Harami Pattern: What It Is, Indicates, and Examples

This pattern formed inside of a cup and handle and inverse head and shoulders pattern. The harami made up the right shoulder of the inverse head and shoulders and the handle formation of the cup and handle. Yes, as its name implies, the bullish harami is indeed a bullish reversal pattern.

The following Microsoft chart is an excellent example of a Bullish Harami Cross. The stock price had been falling from $192 and after a significant drop to $130 a Bullish Harami Cross emerged. The first candlestick in the pattern has a large real body while the second candlestick is a Doji which confirmed the pattern and signaled a bullish reversal.

The pattern then served as the starting point of the upcoming bullish trend (uptrend) that followed shortly after. Bullish and bearish harami patterns help identify potential trend reversals, but they are not foolproof. To mitigate risks, traders should combine harami patterns with other technical analysis indicators, use stop-loss orders to limit potential losses, and carefully manage position size.

How Can I Trade the Stock Market Using the Bullish Harami Candlestick Pattern?

1. The small bullish candlestick inside the bearish one means the bulls are trying to regain control of the bears.
2. They would place their stop loss below the low of the bullish candlestick.
3. By generating pivot points, we can identify the nearest suggested support level (S1) and resistance level (R1).
4. We’ll look into the Bullish Harami pattern’s qualities in this blog post, as well as how traders may recognize and interpret it to improve their trading choices.

Then, the RSI rose despite the price hitting a new low (represented by the pattern’s first candle—a long-bodied bearish candle). This RSI divergence, therefore, supports the potential for a bullish reversal when the second candle—a much smaller bullish candle—gaps up above the first candle and completes the bullish harami pattern. Bullish Harami is a candlestick pattern indicating a potential trend reversal from Bullish to bullish.

According to the Encyclopedia of Candlestick Charts by Thomas N. Bulkowski (link), the Bullish Harami candlestick pattern has a success rate of 53%. Pivot Points are automatic support and resistance levels calculated using math formulas. The idea here is to trade pullbacks to the moving average when the price is on an uptrend. Everything that you need to know about the Bullish Harami candlestick pattern is here.

1. The first candlestick in the pattern is bullish and has a large real body.
2. The first candle is usually long, and the second candle has a small body.
3. While the harami represents a gradual shift through its two-candle sequence, the engulfing signals a forceful, singular takeover.
4. It is a bearish reversal pattern occurring at the top of an uptrend that has a 72% chance of accurately predicting a downtrend.
5. A large candle should be followed by a smaller one; the small candle should be located within the vertical range of the first one.

Bullish Harami Candlestick: Three Trading Tidbits

When identified correctly, the Bullish Harami can be a precursor to a waning bearish trend, potentially setting the stage for a bullish upswing. Savvy traders often scout for this pattern to pinpoint strategic investment opportunities that align with emerging upward movements. Its role in candlestick chart analysis is pivotal, making an in-depth understanding of its nuances essential for insightful market interpretation.

The second main disadvantage of the bullish harami pattern is that it is not advisable to use this pattern in isolation. The bullish harami pattern can give false positive signals sometimes which could lead to losses if not used along with other technical indicators. Bullish harami candlesticks can be a part of a larger pattern, such as symmetrical triangle patterns. Smaller 2-day patterns like the bullish harami may not always form a significant reversal; doji candlesticks can form after the initial pattern, sometimes creating confusion. It is important to wait for a clear direction; sometimes, a stock can chop around and consolidate in an area while figuring out where to go. Yes, the bullish harami pattern can appear in both uptrends and downtrends on price charts.

How to identify Bullish Harami Candlestick Pattern in Technical Analysis?

The three peaks (1, 2, and 3)beginning in February near the same price are bearish and price drops after the pattern completes, as predicted by the pattern. Utilizing the Advance/Decline (A/D) strategy bullish harami candle is a popular approach to analyzing candlestick patterns. A rising A/D index value is an indication of the market gaining momentum, whereas a falling value may suggest that the market is losing momentum. As an example of a live trading scenario, we chose to trade the Dow Jones Industrial Index (INDU).

It consists of a small green candle contained within the previous bearish candlestick. The small one suggests indecision, while the larger one indicates selling pressure. When other technical indicators confirm the setup, it can be used as a signal to enter a long position in the market. A bullish harami candlestick pattern appears at the end of a bearish trend. The appearance of the bullish harami candlestick pattern is a sign that is bearish trend is about to reverse.

Once again, the doji must be contained within the real body of the prior candle. The chart shows a sideways market, with Dogecoin coming from a bullish trend that peaked at the end of January. The price then recovered without strong movements until February 3, when it briefly broke the 0.098 line according to the Fisher Index. However, the candle closed below this line, indicating that it did not break out. The next day, a Bearish Harami pattern formed with the Fisher Index at the top, suggesting it may be a good time to short the asset.

However, in the Bearish Harami, the first candle is long, while the second is short. Additionally, the second real body is contained within the first real body, even if the shadow of the second candle is taller. Harami patterns can produce false signals sometimes especially when the markets are too volatile and price action quickly changes direction. Lastly, continuously monitor the market for changes in price, volume, and other indicators.