The Bearish Harami Japanese Candlestick Pattern is a weak two-candlestick pattern composed of a small black real body contained within a prior relatively long white real body. “Harami” is a Japanese word for “pregnant”. The long white candlestick is the “mother” and the small black candlestick is the “baby”.
The Bearish Harami pattern is a two candle pattern forming in an up trending price pattern.
The body of the first candle is the same color as the current trend and should be a long white candle.
The body of the second candle is black and opens and closes within the body of the previous day’s candle.
Rules to identify the Bearish Harami pattern:
The upward trend has been fairly consistent for a period of time.
The body of the first candle is a long white candle, continuing the current trend.
The second day opens lower than the close of the previous day and closes higher than the open of the prior day. (i.e. the body of the second candle is contained entirely within the body of the first candle).
Further confirmation is required to indicate a reversal signal. The Bearish Harami Pattern is a good indication of a possible reversal, pending confirmation. Wait another day. A confirmation may come in the form of a Three Inside Down pattern.
Potential Signal Strengtheners:
The longer the white candle and the black candle, the more potential of a reversal occurring.
The higher the black candle closes down on the white candle, the more likely that a reversal has occurred despite the size of the black candle.
The higher volume during the Harami days, the more likely a reversal is occurring due to swapping positions.
General Analysis and Investor Sentiment:
The market trend was on its way up. The stronger the uptrend, the more investor sentiment changes to fear of the end of the trend. The market gets overbought and the bulls are starting to take profits or sell off out of fear. The next day the bears start to take short positions while the bulls are selling off, and the price for the day finishes lower. The Bulls continue to take profits as the Bears continue to short.
