Bearish Harami candlestick pattern

Bearish trend

Bearish harami candlestick pattern in similar to bullish harami with opposite interpretation.

By the name itself you may have realized that this pattern is responsible for bearish reversal signal.

As said in my previous article about bullish harami this pattern is also very common and is among those patterns which you can easily found in the charts and also appear frequently.

You need to very well aware while using this pattern. This does not give strong signals rather considered weak signal provider when compared with the Bearish Engulfing pattern.

But it has a frequency in the charts and you can efficiently see them in collaboration with technical indicators. This will help you get market insights.

Let’s find out its characteristics and other key features that may help you to identify a proper trend.

Physical appearance of bearish harami pattern

Like Bullish Harami, it is also formed by a combination of 2 candlesticks. first one being the bullish candlestick and the second one is bearish.

    1. The first candlestick needs to be bullish with a strong bullish sentiment. It has to be sufficiently long, making the market drive in uptrend direction
    2. The second candlestick is a small body bearish candlestick. This is the confirmation of pattern that gives an indication of the start of a bearish trend.
    3. Have significance when found after an uptrend.

bearish Harami example_1_1
Source: Economic Times

Market interpretation of bearish harami pattern

The interpretation also is similar with bullish harami pattern but in opposite sense.

The first candle is a strong long bullish candlestick makes the market look like a place where buyers are dominating the market and may also follow the same trend in coming session.

The main interpretation comes into picture when the formation of the second candlestick take place which is a small bearish candlestick which tries to communicate that the buyers have lost their strength and sellers are now optimistic and ready to actively participate in the market.

Buyers have stopped giving buy orders, so basically they have booked their profit and now moving out from the market. So the market ego is dominated by sellers.

The small bearish body is the very important element that must be noticed. If such things happen after a proper uptrend than you need to be alert verify from indicators start preparing your move.

Try this before you jump into the market

As said earlier this candlestick pattern does not give strong signals and need to be identified carefully. You need to train your eyes to know how this works and assure that your analysis does not give you false signals.

bearish Harami example__1
Source: Economic Times

bearish Harami example__2
Source: Economic Times

Key points to remember

  1. 2 candlestick pattern
  2. Weak signal, need to be used with proper indicators
  3. Works well after bullish trend
  4. The second candle needs to be small and bearish in nature
  5. Can help you to trade with stop loss.

Bottom line

This candlestick pattern when not used consciously can make you suffer from huge loss. Try to get insights of the market with this pattern which it is known for. It can help you avoid loss by proving stop loss level try to understand and use this in your strategy properly.

Post Author: Sushant Putatunda

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