Guide to the Harami Cross Pattern in Stock Trading 2025

A big down candle followed by a doji indicates a bullish harami cross. A rise higher in price that conforms to the pattern validates the bullish harami cross. A huge rising candle followed by a doji indicates a bearish harami cross. To identify a bullish harami on a chart, look for a long bearish candle followed by a short bullish candle.

Inferior Versus Other Major Bullish Reversal Patterns

Engulfing means that one candle’s open and close fit within the real body of the engulfing candle. In bullish harami cross patterns, the first candlestick engulfs the second doji. The bullish harami cross is a two-bar bearish-reversal Japanese candlestick pattern that suggests near-term volatility followed by an extended move, according to the backtest data. Candlestick Patterns are essential tools that help investors identify trends and reversal points in financial markets. From basic patterns like the Doji to more complex ones like the Engulfing and Three Line Strike, each pattern provides specific signals regarding price movements.

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• This candle presents a stark contrast to its predecessor, with open and close prices almost identical, forming a cross.
• Entry typically happens after a bullish confirmation, and the stop-loss is placed just below the support level or the pattern’s low.
• This particular pattern suggests that there may be a transition to upward price movement, hinting at a potential reversal in trend.
• One should note that the important aspect of the bullish Harami is that prices should gap up on Day 2.
• Here, the pattern suggests that buyers are stepping in to defend the range at this level, increasing the likelihood of a bounce back toward resistance.

Note that the line across the top of the previous high formed the top of the cup of a cup and handle. Using technical analysis in conjunction with patterns is helpful in gauging moves. Nonetheless, when you are able to find the boundaries of the previous trend, Fibonacci support and resistance levels can help you confirm the trend reversal and find the right entry level.

The following candle should surpass the high of the previous two to confirm the harami. The bullish harami candlestick pattern is a subtle yet powerful tool in a trader’s arsenal. It quietly signals shifting momentum at the end of downtrends or uptrend pullbacks with growing buyer interest.

To confirm the Bullish Harami Cross, watch the skies for a subsequent price move higher, indicating the storm may be passing, and a bullish trend could be on the horizon. So, while the Bullish Harami Cross can be a valuable guide, it’s not a standalone map for navigating the markets. Remember, when trading with the Bullish Harami Cross, patience and strategy are key.

However, you should look for additional bullish signals in the following trading sessions. Moreover, before making any decisions, it’s crucial to consider the overall market context and other signals to validate the pattern’s reliability. Fibonacci Retracements are another essential tool to use alongside the Bullish Harami pattern. These retracements help identify potential support and resistance levels based on the Fibonacci sequence.

Pattern Forms in a Strong Downtrend

• The Harami candle refers to a Japanese candlestick pattern that consists of two consecutive candles.
• This is followed by the second candle opening higher than the close price of the first candle.
• To illustrate, we observe a bearish trend (downtrend) preceding the candlestick pattern.
• In the first case, there’s no bearish reversal as the price action continues to trade higher, in line with the overall uptrend.
• Once a Bullish Harami Cross is identified, traders should use additional technical analysis tools for enhanced confirmation of a potential bullish trend reversal.

The bullish haram candlestick pattern has its own set of pros and cons. Combining this candlestick pattern with indicators like moving averages or RSI can strengthen your trading bullish harami cross candlestick pattern strategy and improve your entry and exit points. The best place to set your stop-loss is just below the lowest point of the second, smaller candle in the pattern.

Characteristics of the Bearish Harami Cross Pattern:

The MACD crossover, on the other hand, occurs even before the pattern occurs which provides a strong indication that the momentum of the bearish trend is over. The bullish harami candle pattern is a Japanese candlestick formation formed at the bottom of a bearish trend and indicates that the trend is about to reverse. In the example below, we have GBP/JPY price action trading on a weekly chart. In the first case, there’s no bearish reversal as the price action continues to trade higher, in line with the overall uptrend. On the second occasion, the price movements correct lower to finish the mini uptrend.

You can also use pivot points to automatically identify potential key price levels to monitor. In this illustration, we observe a bearish trend (downtrend) leading to the formation of a bullish harami pattern. By generating pivot points, we can identify the nearest suggested support level (S1) and resistance level (R1). We can then use these two levels to plan a potential long-position trade.

Related Patterns to Bullish Harami’s

The bullish situation includes a large downwards pointing candlestick to begin, representing the sellers being in control. It is then followed by an upward doji that is fully confined by the previous candlestick. If the trend is moving down and begins to switch with the Doji centered in the previous candlestick, it is considered a bullish pattern/reversal. If the trend is moving upward and then begins to flip with the Doji again within the last stick candle, it is considered a bearish pattern/reversal.

It provides traders and investors with valuable information about potential trend reversals. By identifying this pattern, market participants can anticipate changes in market sentiment and adjust their trading strategies accordingly. The harami made up the right shoulder of the inverse head and shoulders, and the handle formation of the cup and handle. As seen in the GBP/USD 30-min chart, the RSI crossover occurs exactly at the same time when the bullish harami appears and is above the 30 level.

It’s unnecessary to memorize all the names and criteria for every pattern. What’s more important is to learn the principles of price action and technical analysis. Traders are attracted to patterns partly because they are easy to spot. This sets the stage for reversal, as counter-trend pressure appears to be mounting. The fourth bar opens at the lowest point but retraces in a wide-range outer bar that closes north of the high of the first candlestick. As said earlier, this is the reason to always consult other technical indicators to increase your chances of success.

Volume is perhaps one of the most fundamental technical analysis tools you can use to increase your success rate in trading. Unlike other technical indicators that rely heavily on price, volume is independent of price, making it one of the most essential concepts to understand in trading. As a rule of thumb, when a bullish harami pattern occurs, we want to see above-average volume on the second candle (the small bullish candle), which is the case in this illustration. This is because the significant volume, coupled with the jump in price (gap up), shows that buyers are starting to gain control. Immediately, you can see that we now have a better understanding of the overall price context. Unfortunately, the bullish trend (uptrend) failed to materialize, and the trend continued downward.

The Bullish Harami Cross pattern serves as a valuable tool for traders, offering insights into potential bullish reversals and shifts in market sentiment. By understanding its identification process and adeptly interpreting this pattern, traders can refine their trading strategies. The doji candle in this pattern is formed within the body of the previous red candle. This means that the high and low prices of the doji candle are within the open and close price range of the first candle. It is preferable for the prior trend of the security to be a downtrend and its appearance after it would give a better indication of the bullish reversal. The bullish harami is a reliable bullish reversal pattern that’s found near downtrends or support levels.

Wait for a price breakout above the high of the first (larger) candlestick before entering a long position to reduce the risk of false signals. And don’t forget to set stop loss levels to protect your position just in case the expected trend reversal does not materialize. With these tips, you’ll be better equipped to navigate the trading highway without falling prey to common pitfalls. In the chart of American Airlines Group Inc. (AAL), for instance, a Bullish Harami Cross appeared after a period of downtrend, indicating a potential trend reversal. The price moved higher after the pattern, suggesting a transition in control from sellers to buyers and a potential uptrend initiation. This real-world example illuminates the Bullish Harami Cross’s potential to act as a harbinger of trend reversals.

As with every other candlestick formation, it is advised to use it in conjunction with other technical indicators to improve its reliability. Furthermore, the third signal occurs that further validates our idea of a potential market reversal. The second candle closes below the 200-WMA (the red line), which is another bearish development in these market conditions.