Bullish Harami
A bullish harami is a candlestick pattern that consists of a small candle, followed by a larger candle of the opposite color. The smaller candle is formed completely within the previous candle, and the larger candle is a reversal of the previous candle’s trend direction.
Characteristics of a bullish harami:
- The small candle is formed completely within the previous candle.
- The large candle is of the opposite color to the previous candle.
- The large candle is larger than the small candle.
- The small candle is bearish, and the large candle is bullish.
Interpretation:
A bullish harami is interpreted as a signal that the previous trend is likely to continue in the direction of the larger candle. This is because the small candle is seen as a sign that the selling pressure that had been building up in the previous candle has been exhausted. The large candle is seen as a sign that the buying pressure is increasing and that the trend is likely to continue in the direction of the larger candle.
Trading strategies:
A bullish harami can be traded as a signal to buy a security at the opening price of the large candle. The trader should set a stop-loss order below the low of the small candle. The target profit is the high of the large candle.
FAQs
Is the bullish harami a reliable pattern?
The bullish harami is considered moderately reliable; it signals a potential reversal from a downtrend but should be confirmed with other indicators.
What happens after a bullish harami?
After a bullish harami, there is often a trend reversal where prices may start rising, indicating potential buying opportunities.
How do you confirm a bullish harami pattern?
To confirm a bullish harami, traders look for a strong bullish candle following the harami pattern and may use other indicators like volume increase or RSI support.
What is the psychology behind the bullish harami candle?
The bullish harami represents uncertainty after a downtrend, as buyers enter and prevent further price decline, indicating potential trend reversal.
