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The bearish harami candlestick pattern is one that may or may not be significant. Wise traders take note of it, but wait for acting. The first day has a long white candlestick, which is a continuation of the bullish trend that is happening at the moment. The second, however, holds a surprise. The day opens below the first day’s closing and continues downward, closing with a black candlestick. However, it still closes above the first day’s opening, which makes it less significant than otherwise. This two candle formation could indicate that the bullish trend has reached its ceiling and is beginning to turn.
Understanding this candlestick really takes little more than common sense. While the turn in tides is not definite, as the black candlestick, while significant, is weakened by its diminutive length, it is definitely a strong possibility. At the beginning of the second day, the buyers clearly have lost steam, and traders respond by getting out while there is still a sizeable gain. The bulls are failing to rally. although they may regain it on the third day.
Your Next Move
People who are experienced with candlestick analysis will respond by watching for a continuation of the second day’s losses. This candlestick pattern occurs relatively often, with varying importance. You should prepare to act on a downtrend, but save the action itself for the more important third day.
Confirmation
Confirmation of a bearish trend would include any downward movement. If the third trading day shows more weakness, with a long black candlestick or a large gap down, this is confirmation of the reversal that this pattern suggests. A relatively neutral day following this pattern is also suggestive of an impending downtrend.
Variations
If both candles are very long, this suggests that a ceiling has been reached. It is very possible that the market simply cannot rise any further. Similarly, this candlestick pattern is more significant if the black candle closes very near the white candle’s opening point. If both candles are long and the black candle closes near the white candles bottom, the reversal could be both rapid and dramatic.
Similar Patterns
The bearish harami is very similar to the bearish engulfing candlestick pattern. The key difference is that the harami’s black candlestick does not reach below the white candlestick. If sellers had been able to drive the price below the first day’s opening point, the pattern would be more significant. One thing to consider in understanding this pattern is that it is the precise opposite of the bullish harami, with an exact opposite outcome.
While the bearish harami candlestick pattern is not necessarily something to act on immediately, it is a warning that may give you a chance to sell while your returns are highest. It can also indicate a market stalling, which is significant in and of itself. If the market is merely slowing down, a trader may profit from moving their investments to an area with more action until the market picks back up or shows other signs of movement.
Source : candlestickanalysis
