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.
