A harami is a candlestick that opens and close inside the body of the one preceding it. The ‘Bullish Harami’ is a two candlestick reversal pattern where the first has a big black body and the next has a small white 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 credibility bullish reversal though may develop into the more credible ‘Three Inside Up’ pattern.
Technical Description
1) Preceded by a bear market the first candle of the pattern should have a long black body.
2) The second candlestick should open and close inside the body of the preceding black candlestick.
3) The color of the second candlesticks body should be white indicative of 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 buying, this could either be a gap up in the next candlestick or a white candlestick with a higher close. Stops to any trade should be placed below the patterns low. A tighter stop can be placed below the low of the second candle depending on its location, i.e. if its near the top of the preceding candlesticks body.