What Is a Bearish Harami?
A bearish harami is a two bar Japanese candlestick pattern that suggests prices may soon reverse to the downside. The pattern consists of a long green or blue candle followed by a small red candle. The opening and closing prices of the second candle must be contained within the body of the first candle. An uptrend precedes the formation of a bearish harami.
Key Takeaways:
A bearish harami is a candlestick chart indicator for reversal in a bull price movement.
It is generally indicated by a small decrease in price (signified by a black candle) that can be contained within the given equity's upward price movement (signified by white candles) from the past day or two.
Traders can use technical indicators, such as the relative strength index (RSI) and the stochastic oscillator with a bearish harami to increase the chance of a successful trade.
Bearish Harami Explained:
The size of the second candle determines the pattern's potency; the smaller it is, the higher the chance there is of a reversal occurring. The opposite pattern to a bearish harami is a bullish harami, which is preceded by a downtrend and suggests prices may reverse to the upside.
Trading a Bearish Harami:
Price Action: A short position could be taken when price breaks below the second candle (harami candle) in the pattern. This can be done by placing a stop-limit order slightly below the harami candle's low, which is ideal for traders who don't have time to watch the market, or by placing a market order at the time of the break. Depending on the trader's appetite for risk, a stop-loss order could be placed above either the high of the harami candle or above the long green/blue candle. Areas of support and resistance might be used to set a profit target. *Price action and risk management is always highest priority.
A bearish harami is a two bar Japanese candlestick pattern that suggests prices may soon reverse to the downside. The pattern consists of a long green or blue candle followed by a small red candle. The opening and closing prices of the second candle must be contained within the body of the first candle. An uptrend precedes the formation of a bearish harami.
Key Takeaways:
A bearish harami is a candlestick chart indicator for reversal in a bull price movement.
It is generally indicated by a small decrease in price (signified by a black candle) that can be contained within the given equity's upward price movement (signified by white candles) from the past day or two.
Traders can use technical indicators, such as the relative strength index (RSI) and the stochastic oscillator with a bearish harami to increase the chance of a successful trade.
Bearish Harami Explained:
The size of the second candle determines the pattern's potency; the smaller it is, the higher the chance there is of a reversal occurring. The opposite pattern to a bearish harami is a bullish harami, which is preceded by a downtrend and suggests prices may reverse to the upside.
Trading a Bearish Harami:
Price Action: A short position could be taken when price breaks below the second candle (harami candle) in the pattern. This can be done by placing a stop-limit order slightly below the harami candle's low, which is ideal for traders who don't have time to watch the market, or by placing a market order at the time of the break. Depending on the trader's appetite for risk, a stop-loss order could be placed above either the high of the harami candle or above the long green/blue candle. Areas of support and resistance might be used to set a profit target. *Price action and risk management is always highest priority.