Leavitt Brothers: Education - Candle Stick Patterns

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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

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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