This is one of the most common candlestick pattern and also one of the most important pattern in the stock market as it is too frequently formed. Lets now try to understand this in detail:
- It is a two candle pattern.
- From the name itself you will understand it gives bullish signal. This means when ever this type of pattern is formed in the market, there is higher probability of share price going up.
- Harami term used in is basically a Japanese word which means pregnant.
In order to understand and identify this pattern correctly, there are few conditions which must be met:
1st condition, Stock should be in down trend
2nd condition, Red candles should be formed initially and after that green candles should be formed like this:
3rd condition, the green candle body should be formed inside the body of red color candle.
As you can see in the image above the open and close price of green candle is inside the open and close price of the red candle. Once all such criteria is met you can take you chances as there is higher probability of trend reversal. Nothing is trading can be said 100%. That why you must keep learning keep trying different things than relying just on the guess elements. These data analysis works as of the perfect assessment tools.
Once such pattern is formed, your entry will be the next green candle formed after the bullish harami pattern and the stop loss can be set to the lowest point of the red candle.
- Bullish Harami is a 2-candle pattern
- The first should be a long red pattern
- The second should be a smaller green pattern
- In japanese, harami means pregnant
- The formation of the two candles looks like a pregnant woman. The large candle is a woman who carries the baby (smaller candle) inside her.
- The bullish harami pattern can be a short term trend reversal or trend continuation pattern.
- You can view this candle in the time frame of 5 min, 10 min or 15 mins for intraday trading. There is no such strict rules set for it.
- In swing trading you can check in the daily or weekly time frames.