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Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Doji Star
Dragonfly Doji
Downside Gap Three Methods
Downside Tasuki Gap
Engulfing
Evening Doji Star
Evening Star
Falling Three Methods
Gravestone Doji
Hanging Man
Harami
Harami Cross
Identical Three Crows
In Neck
Kicking
Meeting Lines
On Neck
Separating Lines
Shooting Star
Side By Side White Lines
Three Black Crows
Three Inside Down
Three Line Strike
Three Outside Down
Thrusting
Tri Star
Two Crows
Upside Gap Two Crows

Harami
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Pattern: reversal
Reliability: low

Identification
A long white day is followed by a black day that gaps down and is completely engulfed by the real body of the first day.

The Psychology
In an uptrend or within a bounce of a downtrend a long white day occurs. The next day's gap down comes as a surprise to bulls who thought they were sitting on a great position the previous day. Reliability of the bearish Harami is low, so a weak following day is needed for confirmation.

The bearish Harami could be the first two days of bearish Three Inside Down.



Bearish Harami formations carry low reliability but when they occur at resistance like with APH, reliability increases and the risk/reward tradeoff shifts to a more favorable level.



Here is an example of a bearish Harami forming right at resistance. This situation offers the safest entry on the short side because your risk to the upside is small while your potential gain is great because the stock will likely trade back to support.



AA also formed a bearish Harami at resistance. Notice the lack of volume on the rally up to the previous high. That's hint #1 that the stock has limited upside potential. When the stock got rejected and dropped on big volume and then gapped down the next day, the Harami candle was confirmed, and the stock did indeed reverse course.


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