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Harami is a two stick candlestick pattern or what you may call a two day candlestick pattern observed on the daily charts.

The first day candle is longer than the second day candle. Harami candlestick pattern can be bullish as well as bearish. This is an important signal that bulls are now active and trying to take hold of the market. This means that the downtrend will be soon over and an uptrend is about to start. A bullish Harami is formed in a downtrend when the first day candle is very bearish. But on the second day, the bulls come into play and beat the bears out of the market by taking the prices higher. However, the bulls are not completely successful and the second day is still lower than the first day open and the first day high is not crossed.

The second day is still a down day that follows a bearish trend. On the second day, the open is higher than the close of the first day.

The bulls ruled the second day as the close is higher than the open. Bulls and bears are always fighting with each other for the control of the market. When a bullish Harami is formed what this means is that the bulls are still cautious about their success and fear that the bears might return to take the prices lower again. However, when this does not happen, it gives confidence to the bulls encouraging more buying in the market and the reversal of the trend. Now, like most of the candlestick patterns, a Harami can fail. What this means is that you need to confirm it with the price action on the following day. Always place the stop loss first when you trade. When you spot a Harami, place the stop loss near the open of the second day. Harami pattern has got few variations. On of them is the Bullish Harami Cross Pattern.

The first day in case of a Bullish Harami Cross is a bearish candle.

The signal day or the second day is a Bullish Doji with an open higher than the close of the first day and the close lower than the open of the first day. Now,a Bullish Harami Cross is not formed very frequently. But when it does form, it means an sudden trend reversal. So you should act immediatetly when you spot it.

The bearish Harami Pattern is the other way around.

The first day candle is bullish but the second day candle is bearish with the open lower than the close of the first day and the close higher than the open of the first day. But this means is that bears have taken over the market and soon a new downtrend is going to develop.
Mr. Ahmad Hassam has done Masters from Harvard University. Read this shocking 40 page Candlestick Guide FREE!

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