2.2.2.4 Bearish Harami

In up trends, the harami consists of a large white candle followed by a small white or black candle (usually black) that is within the previous session’s large real body.

Description

Bearish Harami is a two candlestick pattern composed of small black real body contained
within a prior relatively long white real body. The body of the fi rst candle is the same color
as that of the current trend. The open and the close occur inside the open and the close of
the previous day. Its presence indicates that the trend is over.

Criteria

1. The fi rst candle is white in color; the body of the second candle is black.
2. The second day opens lower than the close of the previous day and closes higher than the open of the prior day.
3. For a reversal signal, confi rmation is needed. The next day should show weakness.
4. The uptrend has been apparent. A long white candle occurs at the end of the trend.

Signal enhancements

1. The reversal will be more forceful, if the white and the black candle are longer.
2. The lower the black candle closes down on the white candle, the more convincing that a reversal has occurred, despite the size of the black candle.

Pattern psychology

The bears open the price lower than the previous close, after a strong uptrend has been in effect and after a long white candle day. The longs get concerned and start profit taking. The price for the day ends at a lower level. The bulls are now concerned as the price closes lower. It is becoming evident that the trend has been violated. A weak day after that would convince everybody that the trend was reversing. Volume increases due to the profit taking and the addition of short sales.