Harami Bearish Complete Guide

What is Harami Bearish?

The Bearish Harami is a two-candle reversal pattern that appears at the peak of an uptrend. The name "Harami" is derived from the Japanese word for "pregnant," which describes the visual appearance of the pattern: a large-bodied bullish candle (the "mother") followed by a much smaller candle (the "baby") whose real body is entirely contained within the vertical range of the previous candle's real body. While the second candle is typically bearish, its color is less critical than its size and position, though a red/black second candle is generally preferred for a stronger bearish signal. Technically, the pattern represents a sudden contraction in volatility and a loss of upward momentum. After a period of aggressive buying, the small second candle indicates that the bulls are exhausted and the bears are beginning to step in, or at least that the buying pressure has stalled. According to Steve Nison, who introduced Japanese candlesticks to the West, the Harami is a warning that the prior trend is ending, though it doesn't always guarantee an immediate trend reversal. In terms of statistical performance, Thomas Bulkowski’s research in the "Encyclopedia of Candlestick Charts" suggests that the Bearish Harami acts as a bearish reversal 53% of the time, which is only slightly better than random chance. However, its performance improves significantly when it occurs near established resistance levels or when confirmed by a third candle closing below the first candle's midpoint. Volume typically declines on the second day, reflecting the indecision and the "wait-and-see" approach of market participants. Traders often look for a break below the low of the first candle to confirm the bearish bias.

Identification Rules

1. The market must be in a clear, identifiable uptrend prior to the pattern.
2. The first day must be a long bullish (green/white) candle.
3. The second day must be a small candle whose real body is completely contained within the first day's real body.
4. The color of the second candle is ideally bearish (red/black), but it is not strictly required.

References

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

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