Knowing the candlestick Pattern (Bullish & Bearish Harami)

Hello, my friends, I welcome you all once again to another episode of my tutorial which I titled Knowing the Candlestick Pattern (Bullish & Bearish Harami). If you have been following my tutorial closely, you will have come across many of these patterns which I have earlier discussed.

For a recap, I will give a brief overview of all the ones I have discussed previously so that we all can get ourselves on track as we progress. You may need to read through my blog to get a proper insight into the different patterns I will be reversing with us. Let's get started.

Engulfing, Doji, Morning & Evening, Pin Bar*

The first chart pattern we discussed is the engulfing bar and we said it is a chart pattern that is made up of two candles one of which is bullish and the other bearish. The engulfing bar is either a bullish engulfing one or a bearish engulfing one depending on which engulfs the other. It saves as a trend reverse signal or a trend continuation signal depending on where it is found.

The second chart pattern we talked about is the Doji candle, and we said it is a candlestick pattern that describes indecision in the market. Here the pattern communicates to the traders that either the buyers or the sellers are losing momentum in the market hence a trend reversal is possible. We also have the gravestone doji and the dragonfly doji. You can get the full details of this in my blog as I have made a post on it.

Thirdly, we discussed the morning and evening stars. We said this is another strong chart pattern which is a trend reversal pattern and it is made up of three candles namely a bullish, a doji or small candle, and a bearish candle depending on whether the pattern is morning or evening star. It is usually seen at the support and resistance level and tells the trader that the trend is about to change in the opposite direction.

Lastly, we looked out the pin bar which we said is a single candle that has a small body that opens and closes in almost the same position or close to each other. It is characterized by a longer upper or lower wick depending on the type of pin bar it is. We have the bullish and the bearish pin bar which we call the hammer and the shooting star respectively.

The Harami pattern

Today we will be looking at another candle pattern called the Harami pattern. This is another important candlestick pattern that must be taken into consideration. It is also made up of two candlesticks the first is called the mother candle and the second is the baby.

Here we call the first candle which is usually a very large candle the mother candle followed by a smaller candle which is called the baby candle. For the Harami pattern to be valid the second candle must be complete with the first large candle. This pattern is considered a reversal and a continuation pattern depending on where it is found.

The Harami pattern which is sometimes called the insider bar is so called because the second bar or candle as stated above is completely covered by the first which we refer to as the mother candle. We may have seen how a chicken protects its hens against any attack, this is the same when it comes to this candle pattern.

The psychology behind its formation

The Harami candle is formed when the market is in an indecision face i.e. the price is consolidated at this point. Neither the buyers nor the sellers have complete control of the market then. When we see this pattern in an uptrend movement or a downtrend movement, it implies trend continuation.

In the same way, when we see this pattern at the top of an uptrend near a resistance level, it signifies a trend reversal to the opposite direction. In the same way, when this pattern is seen at the bottom of a downtrend near the support level then it implies that the trend is also about to change to the next direction.

Bullish and Bearish Harami

As I have stated earlier, there are two major types of the harami pattern and that is bullish and the bearish harami. In this section, I will be discussing both of these patterns and also showing us an example of it from a chart in the tradingview.com platform. Let's look at them one after the other.

Bullish Harami pattern

It is a so-called bullish harami because this pattern is made up of two candles in which the first one which is the mother candle is always the large one normally bearish in nature and the second which is the baby candle is usually bullish. The image below shows us a clear example of these candle patterns.

From the chart pattern above, you will notice that the smaller candle which is the baby candle is covered completely by the mother candle and that is why it is called the inside bar because it is completely inside the first bar. Immediately after that pattern, you see the trend moving in a bullish or uptrend direction.

Bearish Harami pattern

It is a so-called bearish harami because this pattern is made up of two candles in which the first one which is the mother candle is always the large one normally bullish in nature and the second which is the baby candle is usually bearish. The image below shows us a clear example of these candle patterns.

From the chart pattern above, you will notice that the smaller candle which is the baby candle is covered completely by the mother candle and that is why it is called the inside bar because it is completely inside the first bar. Immediately after that pattern, you see the trend moving in a bearish or downtrend direction.

Conclusion

The Harami pattern is an important pattern that should never be ignored as it comes with a powerful message to the traders. The pattern as I have said earlier is a trend continuation or a trend reversal pattern. It is a continuation pattern when seen during a downtrend or uptrend and it is a reversal pattern when seen at the top or bottom of an uptrend or downtrend respectively.

Disclaimer: ^{This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your research and consult a financial advisor.}

NB: All images are mine and taken from tradingview.com website