A green or white body typically represents a bullish candle, indicating that the closing price was higher than the opening price. A red or black body represents a bearish candle, showing that the closing price was lower than the opening price. The colour of the candlestick body can vary, typically being green or white for a bullish (upward) movement, indicating that the closing price was higher than the opening price. By the end of this guide, you’ll have all the tools you need to navigate bullish candlestick patterns like a pro.
What is the bullish candlestick?
In this blog, we will see about the Bullish Harami Pattern, which is one of the Japanese candlestick charting techniques. We will deeply describe the Bullish Harami Pattern formation, structure, theory, and techniques to analyze and make profit with this pattern. Normally candles have upper and bottom wicks (vertical lines) and bodies (colored zone). The upper point is the highest price, while the bottom end is the lowest price. The vertical borders of the body stand for the open and the close prices. If the open price is lower than the close price, the candle is green, and vice versa.
Formation of candlestick
A hammer shows that although there were selling pressures during the day, ultimately a strong buying pressure drove the price back up. The colour of the body can vary, but green hammers indicate a stronger bull market than red hammers. If the closing price is above the opening price, then normally a green or hollow candlestick (white with black outline) is shown. If the opening price is above the closing price then a filled (normally red or black) candlestick is drawn.
If the RSI is showing that the asset is oversold, it may further confirm the potential for a bullish reversal. Chainika Bahl Thakar is a Content Specialist at QuantInsti with over five years of experience in writing technical content for algorithmic trading and financial markets. With a background in economics from Panjab University, she specializes in SEO, content marketing, and Python-driven tutorials for tasks like data analysis and price prediction. Chainika bridges the gap between complex quant concepts and practical learning through clear, accessible content. With the real-life trading example, you’ve seen how to apply a bullish pattern strategically for profit.
Now that we know how to identify this supposed bearish reversal pattern let’s learn how to trade this harami pattern profitably. Prices are above the 50-day simple moving average, constituting an uptrend. The second bar is entirely engulfed by the first bar, fulfilling all the pattern requirements. But before we dive into the past performance of this bearish harami pattern, let’s learn how to identify it on our candlestick charts.
We recommend you to download our free Candlestick Pattern Bible to find more professional candlestick formations for your needs. The bearish harami candlestick pattern is the opposite of its bearish kin. The bearish harami pattern occurs in an uptrend, with its first candle being a large bullish red candle followed by a smaller engulfed candle. The stock price is downtrending as it’s below the 50-day moving average.
By understanding its identification process and adeptly interpreting this pattern, traders can refine their trading strategies. The Bullish Harami Cross pattern implies that the bears’ dominance may be waning, and buyers are potentially gaining control, leading to a trend reversal. Traders interpret this pattern as a signal to consider initiating long positions or tightening stop-loss levels on existing short positions. As you see in the above image the Bullish Harami formed in the low trend. You can see that the market has full control over the seller and reached the low price. Then the buyer pushed the market for the reversal at the support level.
Low-Risk Entry Points
While less dramatic than other reversal patterns, its subtlety provides earlier entry opportunities for anticipatory traders. The pattern’s bearish implications intensify when the second candle forms as a Doji or appears near major resistance levels, round numbers, or at Fibonacci extension points. The pattern frequently appears during earnings seasons when unexpected news disrupts prevailing sentiment.
- Various strategies exist for both entry and exit, each presenting unique insights and considerations.
- The Bullish Harami pattern consists of two candlesticks, where the first candle is a large bearish candle followed by a smaller bullish candle.
- The pattern consists of a long bearish candlestick followed by a smaller bullish candlestick, where the latter’s body lies within the range of the bearish candlestick.
- Instead, a trader could implement a profit target based on a defined risk/reward ratio, a measured move, or use a trailing stop to exit the long position.
- Its reliability increases with other technical indicators, such as RSI and moving averages.
Mastering the Long-Legged Doji: A Trader’s Guide
However, the next candle signals that the selling pressure is fading. Join 1,400+ traders and investors discovering the secrets of legendary market wizards in a free weekly email. The bearish mean reversion trading setup is the mirror opposite of its bullish brethren. Let’s use history as our guide and learn how to trade these two candlesticks profitably.
Confirmation is critical with this pattern; traders typically wait for a decisive breakdown below the Hanging Man’s low on the following session before establishing short positions. The pattern gains particular importance when accompanied by a volume spike, suggesting aggressive selling despite the price recovery. Hanging Man formations that appear after three or more consecutive bullish candles warrant special attention, as they often mark the exhaustion point of buying momentum.
Also, seeing the pricing break above and holding the first candle will confirm a strong reversal. Use proper risk management techniques when trading bullish harami patterns. They typically occur at the bottom of downtrends and signal a potential reversal. The first candle is a bigger, bearish candle, followed by a second, smaller, bullish candle that’s contained within the bearish candle. The word harami means pregnant, so picture this visual when looking at the pattern, because the small candle looks like the belly of the candle.
Related Patterns to Bullish Harami’s
- One of the most prevalent and easiest bullish candlestick patterns to understand is three white soldiers.
- We saw the bearish harami on the daily chart for Apple (AAPL) on December 28th, 2021.
- The Bullish Engulfing pattern gains maximum reliability when forming at the bottom of prolonged downtrends, particularly after accelerated selling phases that suggest capitulation.
Traditional traders enter short on a break of the low of the second candle and place a stop loss above the high of the first large candlestick. If the next candle of the Bullish Harami breaks the previous resistance trend line, we can get confirmation that the market is going to rise. Others perceive the harami candle as an indecision sign and prefer to halt their trades until new candles show up and make the trend direction clearer. In a downtrend, it indicates a buying pressure, followed by a selling pressure that was not strong enough to drive the market price down.
In conclusion, the Bullish Harami Cross is one of the most reliable and profitable Japanese candlestick patterns. It has a good accuracy of 55.3%, resulting in a profit per trade of 0.58% and an average winning trade of 4% over 10 days. Our data proves the Bullish Harami Cross has upside predictive qualities. The Bullish Harami Cross proves to be the most reliable Harami pattern. Extensive analysis of 1,609 trades conducted on the 30 Dow Jones stocks over a 20-year period demonstrates an average profit of 0.58% per trade. This encompasses both winning and losing trades, solidifying its reliability as a trading tool.
Supporting Levels
Traders often pay more attention to these patterns as they can indicate larger market trends. For example, a Bullish Harami pattern on a weekly chart could suggest a bullish harami candlestick pattern potential trend reversal that could last for several weeks or even months. This is particularly useful for swing traders or long-term investors who are looking to capture larger price movements.
Likewise, some may dismiss a bullish harami that occurs on low volume. The psychology behind a Bullish Harami pattern is based on a sudden change in market sentiment. This shift suggests growing confidence in market growth and indicates a potential reversal. You can try trading the Harami candlestick pattern for free on the LiteFinance demo account. A long bullish candlestick that fully engulfs the previous bearish one
The pattern highlights strong conviction that the uptrend will continue. Bullish Separating Lines is a two-candle continuation pattern where a bearish candle is followed by a bullish candle opening at the same level but rallying upward. The pattern develops when bearish pressure drives the market down but stalls at a fixed level across two sessions. This repeated defense of the same price reflects accumulation and growing buyer interest.
The second candle is contained within the first candle for the bullish harami while the first candle is contained within the second candle for the bullish engulfing. During the second low of the double bottom pattern, a bullish harami pattern appears. Simultaneously, the low of the bullish harami prints near the lower Bollinger band. The second candle gaps higher on the next day’s open and prints a small candle contained inside the first candle. A trader would wait for confirmation of a continued rally before enter the position.