Bearish Harami Pattern, How to Trade it
A bearish harami is a two-bar Japanese candlestick pattern that suggests prices may soon reverse to thedownside. The pattern consists of a long white candle followed by a small candle. The second candle’s opening and closing consist of the body of the first candle. The word “bearish” is derived from how bears fight their enemies, like a bear will put his enemy down. The bearish word is mostly used in this way. In the Japanese language, the word “harami” means pregnant. The harami pattern gets its name from the visual structure of the pattern. An Example of Bearish Harami
It shows the bearish harami candlestick pattern that appears after an uptrend. The bearish harami is
followed by a trend around, e.g., a stock that goes up, moves back, and again starts falling. The two
candles that are shown in the example that is marked are basically “Bearish Harami” candlestick
patterns.
Difference between Bullish and Bearish Harami Candlestick Patterns
There are two terms are used:
Bullish and Bearish harami patterns and here we might see the two differences between these two terms:
Bullish Harami Pattern:
This pattern is formed at the bottom of the price chart. The bullish harami pattern indicates a potential turn in the trend from a bearish to a bullish market. The bullish harami pattern is formed when a long-bodied red candle is followed by a short-bodied green candle.
Bearish Harami Pattern:
This pattern is formed at the top of the price chart. Bearish-Harami Pattern: The bearish harami pattern indicates a possible trend change from a bullish to a bearish market. This pattern is formed when a long-bodied green candle is followed by a short-bodied red candle.
What does Bearish Harami indicate?
The bearish-harami candlestick pattern indicates a potential trend move in the markets from bullish to
bearish. Bearish harami patterns also point out that buyers are losing energy and sellers can potentially
take over.
This is mainly characterized by two candles. The first look is a long green candle, followed by a short red
candle. This double candle structure appears when the market is comprehensive and soon turns
towards the downside.
Characteristics of the Bearish Harami
Candlestick Pattern
Here are a few characteristics of the Bearish-Harami candlestick pattern:
- The Bearish-harami candlestick pattern is followed by two candles. The first one is a long green candle, and the other is a short red candle.
- The bearish-harami pattern is formed at the top of the price chart, and it appears after an upward trend.
- The short red candle represents that buyers are losing their influence over the market, and the market could potentially go downward.
- Traders used this candlestick pattern to achieve a new position in the market.
Strategies for Bearish Harami
The bearish-harami is said to be recreated when traders take a short position in the market after seeing
the formation of the bearish harami candlestick pattern. A few strategies for bearish harami are:
Confirmation of the pattern:
A trader can confirm the bearish-harami pattern by using additional technical tools. A trader should
confirm this pattern by checking whether it is formed according to the existing rules of the pattern or
not.
Setting up a stop loss:
Setting up a stop-loss is a must for every trader. Traders usually prefer to set up their stop losses above
the high of the long-bodied green candle.
The bearish-harami patterns indicate a potential turnaround in the market whenever it is formed. Traders can find good trading opportunities using this market. They can take a short position when a bearish-harami pattern is confirmed with the help of other technical tools like RSI and MACD. Both of them can be helpful, as they give early signs of reversals.
