Leavitt Brothers: Education - CandleStick Patterns

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Harami Cross

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Pattern: reversal
Reliability: low

Identification
A long black day is followed by a Doji which gaps opposite the trend and is completely engulfed by the real body of the first day.

The Psychology
In a downtrend or within a pullback of an uptrend, a long black day occurs. The next day’s gap up comes as a surprise to the shorts who thought they were sitting on a great position the previous day. The stock closes where it opens to signify a churn day with neither the bulls nor bears showing much force after the opening gap up. Reliability of the bullish Harami Cross is low, so a strong following day is needed for confirmation.

Here is an example of a stock forming bullish reversal candle at support…the most reliable place to appear. Your risk/reward is heavily in your favor if you play a Harami Cross at support rather than at what you think might be the end of a downtrend.

POOL presents anther desirable place to play a Harami Cross. The stock was in a steady uptrend and simply pulled back to the longer term support trendline and formed the bullish reversal (we consider it a continuation) candle. The white candle that follows is your entry.

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