Harami Bullish Complete Guide

What is Harami Bullish?

The Bullish Harami is a two-candle reversal pattern that appears during a downtrend, signaling a potential shift in momentum from sellers to buyers. The name 'Harami' is derived from the Japanese word for 'pregnant,' which aptly describes the pattern's visual appearance: a large-bodied bearish candle (the 'mother') followed by a much smaller candle (the 'baby') whose entire real body is contained within the vertical range of the first candle's real body. Technically, the first bar must be a long red or black candle, reflecting strong selling pressure. The second bar is a small candle—ideally a bullish one, though a small bearish body is acceptable—that opens with a gap up from the previous close. This gap indicates that the selling pressure has exhausted, and buyers are beginning to step in. According to Steve Nison, the pioneer of Japanese candlestick charting in the West, the Harami represents a 'disparity' in the market's health, suggesting the prior trend is losing steam. In terms of volume, Thomas Bulkowski’s research in the 'Encyclopedia of Candlestick Charts' suggests that while volume often decreases on the second day, the pattern's overall performance is modest. Bulkowski ranks the Bullish Harami as a reversal pattern with a theoretical frequency, but notes its 'overall performance' rank is often in the middle of the pack (around 38th out of 103 patterns). His data indicates a reversal rate of approximately 53%, meaning it acts as a reversal slightly more often than a continuation. For higher reliability, analysts look for a confirmation candle on the third day or an oversold reading on oscillators like the RSI.

Identification Rules

1. The market must be in a clear, identifiable downtrend prior to the pattern.
2. The first day must be a long black (bearish) candle that continues the downtrend.
3. The second day's real body must be completely contained within the real body of the first day.
4. The second candle's color is ideally white (bullish), but the containment of the body is the primary requirement.

References

• Thomas N. Bulkowski (2005). Encyclopedia of Chart Patterns.
• Steve Nison (2001). Japanese Candlestick Charting Techniques.

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