Bearish Harami Pattern

The bearish harami is a two-candle Japanese candlestick pattern that signals prices may soon reverse into a downtrend. It forms from a long bullish candle followed by a small bearish candle, where the open and close of the second, smaller candle must sit inside the body of the first, larger candle. It appears after an uptrend. For more, read about Bearish Engulfing Pattern.

Read more: an overview of the most common Japanese candlestick patterns.

Key Points of the Bearish Harami Pattern

• A bearish harami is a candlestick chart signal for a reversal in an upward price move.
• It is generally completed by a small price decline shown as a red candle, contained within the prior upward move that is marked by a larger bullish candle — two candles in total.
• Traders use technical indicators such as the Relative Strength Index (RSI) and the stochastic oscillator alongside the bearish harami pattern to help confirm short-trade signals.

Explaining the Bearish Harami Pattern

The size of the second, bearish candle determines how strong the pattern is: the smaller it is, the higher the odds of a bearish reversal. It should be preceded by an uptrend, and it points to prices potentially reversing into a downtrend.

Traders typically combine other technical indicators with the bearish harami pattern to make it a stronger trading signal. One of the most common indicators used alongside this pattern is the 200-day simple moving average, which helps confirm that the market is in a longer-term downtrend and that it has made a short bullish correction when a bearish harami forms, just before the downward move takes over.

Trading the Bearish Harami Pattern

The price action in this pattern lets traders take a short position once price breaks below the small, second bearish candle in the pattern. This can be done by placing a pending order slightly below the low of the second candle in the pattern — useful for traders who don’t have time to watch the market — or by placing a market order at the moment of the breakout. Depending on the trader’s risk tolerance, a stop-loss order can sit above the top of the harami candle or above the long bullish candle that came before it. Support and resistance zones can also be used to set a profit target for this pattern.

Indicators such as the Relative Strength Index (RSI) and a stochastic oscillator can be used alongside the bearish harami pattern to help confirm short-trade signals. A short position can be opened when the pattern forms and the indicator gives an overbought reading.

Since the bearish harami pattern tends to work best when traded within an overall downtrend, it can help to adjust the indicator settings to make it more sensitive, so it registers an overbought reading during a bounce within the trend.

A profit target can be set for when the indicator returns to the oversold zone. Traders who want a larger profit target can use the same indicator on a bigger timeframe: if the daily chart was used to take the trade, the position can be closed once the indicator gives an oversold reading on the weekly timeframe, for a larger profit.

In short, the bearish harami pattern is a Japanese candlestick pattern made up of one large candle moving in the direction of the trend, followed by a small doji candle that sits entirely inside the body of the previous candle.

The bearish harami pattern signals that the prior trend may be about to reverse, and the pattern can appear in a bullish or bearish form: the bullish version points to a possible price reversal to the upside, while the bearish version points to a possible price reversal to the downside.

Read more:

• Using price action on the candlestick chart correctly
• Japanese candlestick patterns — the 14 best-known reversal patterns
• A guide to the best 9 patterns for mastering Japanese candlesticks in trading

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