A harami is a candlestick that opens and close inside the body of the one preceding it. The ‘Bearish Harami’ is a two candlestick reversal pattern where the first has a big white body and the next has a small black body inside the one preceding it. The pattern takes its name from a pregnant woman which in old Japanese is called ‘Harami’. A commonly occurring pattern this is rated as a low level bearish reversal though may lead into the more reliable ‘Three Inside Down’ pattern.
Technical Description
1) Preceded by a bullish market the first candle of the pattern should have a long white body.
2) The second candlestick should open and close inside the body of the preceding white.
3) The color of the second candlestick body should be black indicating its bias.
4) Ideally the wick and tail of the second candlestick should be inside the body of the first though this is not necessary.
Mark’s Perspective
More than anything a harami is a sign of indecision and disinterest. It should be taken more as a warning signal of an impending change in trend and not the start of one. It is important to look for a confirmation before shorting, this could either be a gap down in the next candlestick or a black candle with a lower close. Stops to any trade should be placed above the patterns high. A tighter stop can be placed above the high for the second candle.