The Bullish Harami Cross pattern is similar to the Bullish Harami as it also signals a possible end to a bearish trend and the commencement of a bullish trend. The Bullish Harami Cross is similar to the Bullish Harami, but with one key difference – the second candle is not clearly bullish; it is a doji or spinning top. This second candle indicates equal buying and selling pressure, making it an indicator of a potential bullish trend reversal.
The bullish harami candlestick pattern tells us that the market sentiment is changing and that price will likely follow. In a downtrend, this could mean a complete trend reversal towards an uptrend. Bullish and bearish haramis are among a handful of basic candlestick patterns, including bullish and bearish crosses, evening stars, rising threes, and engulfing patterns. A bullish harami candle deeper analysis provides insight using more advanced candlestick patterns, including island reversal, hook reversal, and san-ku or three gaps patterns.
A. How to identify a Bullish Harami Cross on the chart?
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. The image below depicts a price chart with a bullish harami pattern.
Bullish Engulfing
The bearish harami patterns tell investors and traders about upcoming bearish trend reversals. Bullish harami patterns, on the other hand, tells traders about upcoming uptrends. The bullish harami candlestick pattern signals that the bulls are gaining control of the market and that asset prices are on the rise.
Bullish Harami Pattern: The Japanese Candlestick That Predicts Reversals
A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up. The colour of the body can vary, but green hammers indicate a stronger bull market than red hammers. They are commonly formed by the opening, high, low, and closing prices of a financial instrument. For crypto, H1 and higher offer better structure and fewer fakeouts, while for stocks and Forex, 4H to daily charts work well for swing trading. It needs context – ideally, a clear downtrend, volume shift, or indicator divergence. The Bullish Harami may look similar to some other popular patterns.
What is a Bullish Harami candlestick pattern?
As such, we can consider taking a long position in anticipation of a potential upward rally that may follow. Nevertheless, this variant still signals a potential reversal, as it also abruptly halts the prevailing downward price trajectory. Bearish haramis, bullish engulfing, and tweezer bottoms are patterns related to bullish haramis. Bullish engulfing is the opposite of bullish haramis, which includes a small bearish candle followed by a large bullish candle that engulfs the previous candle’s body. Tweezer bottoms are similar to bullish haramis and feature two candlesticks with identical lows and signal a bullish reversal.
When Does the Bullish Harami Candlestick Pattern Appear?
The Dragonfly Doji has its roots in Japanese rice trading, where traders considered it a symbolic sign of exhaustion among sellers. Historically, its presence was treated as a possible bottoming clue. According to Thomas Bulkowski’s Encyclopedia of Candlestick Charts, bullish Marubozu has about a 51% reliability in predicting upward continuation. The pattern becomes more dependable when it appears after a prolonged downtrend. In Japanese candlestick literature, Marubozu literally means “shaven head,” a reference to its clean, shadowless appearance. It has been tracked since the 18th century as one of the strongest signs of bullish momentum.
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If the price breaks below the Harami candle low, the reversal attempt has likely failed, and the bears are back in charge. Additionally, you can add a little buffer in case of a volatile market, such as crypto. Suddenly, the bears can no longer push prices down as aggressively anymore. Perhaps some bargain hunters may have stepped in, or perhaps the sellers simply grew tired. In any case, that small bullish candle represents indecision and weakening bearish momentum. HowToTrade.com helps traders of all levels learn how to trade the financial markets.
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- Combining this candlestick pattern with indicators like moving averages or RSI can strengthen your trading strategy and improve your entry and exit points.
- It forms when sellers dominate early in the session, driving prices down, but buyers regain control and close the price back near the opening level.
- Waiting for that third confirmation candle can significantly improve your win rate and help you avoid dangerous false signals.
- Place your stop loss 1-2 ticks below the LOW of the Harami candle (second candle).
Backtesting the Bullish Harami Candles
In practical use, it signals hesitation in the downtrend, with buyers beginning to counteract the selling pressure. This pattern forms when both bulls and bears push prices significantly during the session, but neither side manages to dominate. Bullish spinning top has been described in early Japanese candlestick teachings as a pause in the market’s direction. Traders historically used it to watch for changes in sentiment rather than act on it immediately. The candle represents indecision that eventually leans toward bullishness, as buyers step in at lower levels. It often acts as a turning point in markets where sentiment has been negative.
LiberatedStockTrader’s candlestick research shows Matching Low produces around 55–57% reversal accuracy. Quantified Strategies notes the signal works better near long-term support levels, pushing effectiveness closer to 60% with confirmation. Matching Low is a two-candle bullish reversal pattern where the second candle closes at the same level as the first.
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- According to Google search data, the Bullish Harami Cross candle is a popular pattern, but most traders do not know how to trade it based on the data.
- The appearance of this pattern hints at a weakening of the bullish sentiment and the possibility of a downward trend.
- A Harami candle is a two-candle pattern characterized by a long candle encompassing the following smaller candle.
- It’s important to remember that the preceding trend will help determine how strong the reversal is.
- The formation occurred with a wide bearish candle followed by a doji-like second candle that closely resembled perfect indecision.
A stop-loss order is a pre-decided order that states that a security can be either bought or sold when it reaches a certain price known as the stop price. While trading using the bullish harami candlestick pattern, a stop loss must be placed below the low of the first bearish candlestick. Harami patterns are of two kinds namely the bearish harami and the bullish harami.
Thus, a bullish Harami pattern indicates that after a period of decline, the market is showing signs of shifting sentiment. This could mark the beginning of an uptrend as buyers start to regain control and sellers lose their grip. These are price levels at which the price trend has historically reversed.
