Srading.com

Menu
  • Home
  • Markets
    • Forex
    • Stock
  • Fundamental Analysis
    • Economics
    • Money & Banking
  • Technical Analysis
    • Drawing Tools
    • Chart Patterns
  • Tools
    • Online Charts
    • Economic Calendar
    • Interest Rate Today (Live Widget)
    • Forex Market Hours
    • Currency Indexes Chart
    • National Holiday Calendar
    • CoT Chart
    • Quotes

RISK WARNING: Trding financial assets come with a high risk of losing money. So, everything you read on this website is for educational purposes or personal opinions only

Read our DISCLAIMER
Home
Technical Analysis
Chart Patterns
Bearish Harami Candlestick (How to Trade & Examples)
Chart Patterns

Bearish Harami Candlestick (How to Trade & Examples)

September 12, 2022 Zafari

What is Bearish Harami?

A bearish harami candlestick is a reversal pattern suggesting a future downtrend. It forms at the top or end of a bearish correction structure.

This pattern is a combination of two candlesticks. The first candlestick is a tall bullish (green), and the second candle is a small green or red candle.

If the second candle is a doji, it is called a bearish doji cross.

bearish harami and harami cross

A bearish harami after a rally means that the market is exhausted. It may reverse. Moreover, the chance of reversal increases, if there are other technical and fundamental signals.

The opposite of the bearish harami is the bullish harami which appears at the top.

bullish vs bearish harami

How to Trade Bearish Harami? 

Due to its small second candle, a bearish harami requires more signals, or a few but potent.

So, before an investor trade this pattern, he should consider the following things:

  1. A bearish harami should appear after an uptrend. For example, if it appears after a reversal it has almost no meaning.
  2. A long first candle conveys more power. It indicates that the volume is high and more market participants are active. 
  3. If the second candle closes near the bottom, it is an indication of power, and better for reversing the trend.
  4. A smaller second candle with small tails, such as a doji is better. That is why a harami cross is more reliable.
  5. A bearish harami immediately after a trend reversal signals a consolidation than a reversal.
  6. Combine a bearish harami with other technical charting techniques such as patterns and indicators. 
  7. Check the economic calendar and fundamentals. Confirmation from a fundamental perspective reduces your emotional decisions. Thus, helps you to trade with less emotion.

Bearish Harami Examples

In this post, I posted three examples. The first two succeeded in bringing down the price. However, the last example did not.

Example #1

On 20-21 Oct 2021, the Pinterest stock chart made a bearish harami pattern. This pattern was successful, and the market collapsed after that.

real example of bearish harami
Pinterest chart by TradingView

Reasons that this harami pattern predicted the collapse of Pinterest stock are the following:

  1. On 20 Oct 2021, there was huge news about Pinterest. For example, New York Times titled “PayPal Is Said to Be in Talks to Buy Pinterest in $45 Billion Deal.” And Bloomberg reported about it too. Because the deal was not made, its price could not continue going up, except on the day of the report. A screen of news search is provided below.
  2. The first candle of this harami is tall. A taller candle in a harami pattern makes it more potent;
  3. The second candle in this chart is short. Additionally, the second candle has small tails, another reason for its strengths. 
  4. In late July, there is a big gap (window), and the price could not penetrate it on 20 Oct 2021. Technically, windows are more potent than candle patterns.
  5. Before this harami pattern, the momentum indicator, which is a leading indicator, did not show an oversold condition. If the market is not oversold, then buyers may not be in control.

Example #2

In early September, Goldman Sachs completed a bearish harami. Technically, because the second candle closed above the middle of the first candle, it was not very promising. However, many other signals support this pattern.

Real example of harami structure
Goldman Sachs chart by TradingView

Those signals that support the above bearish harami are the followings:

  1. A shooting star 12 sessions earlier could not close above the resistance line created in late August. It is a sign that bulls are losing and bears are getting momentum. 
  2. Eight candles later another bearish candle tested this area but failed.
  3. If the shooting star and the strong resistance area are not enough, the next candle after the bearish harami opened after a gap-down. It should clear any opposition to short.

If you are short in situations like the above, put a stop loss above the harami structure.

Example #3: Failed Example

Microsoft chart from 17-18 and 28-29 of Jun 2020 made two harami patterns.

However, non of them worked.

failed example of bearish harami pattern
Goldman Sachs chart by TradingView

Here are the reasons that prices failed to reverse after these harami candlestick patterns: 

  1. There is no major supporting signal, except a relatively weak support area. For example, the momentum indicator was not an area to be considered an overbought situation.
  2. The first pattern did not occur after a big rally. The second pattern formed after a rally but was not strong because the first candle was not tall and the second candle formed near the top of the first candle. In a bearish harami pattern, if the first candle is tall and the second candle opens and closes near the bottom, it has more strength. 
  3. The second candle of this pattern opened and closed near the top of the first candle. It is like a continuation pattern.
  4. There was not any news that degrades the stock price of Microsoft. I googled.

Based on the above reasons, if you see a similar pattern to them, you have to confirm it with other tools. There were not sufficient pieces of evidence, and the stock price did not fall.

Anyway, if you sell in situations like this, put a stop-loss above the pattern. You may lose. It’s OK in trading to lose sometimes. Cutting loss is better than the continuation of loss. So, do not forget to put a stop-loss.

Bottom Line

Bearish harami is a reversal candlestick pattern and the counterpart of the bullish harami. It forms at the top and suggest a downtrend.

This pattern is not as reliable as bearish engulfing pattern and dark cloud cover. So, look for more supporting signals.

Share
Tweet
Linkedin
Pinterest
Reddit
Email
Prev Article
Next Article
Tags:Forex Pattern Stocks Technical Analysis

Related Articles

Falling Three Methods Pattern (How to Trade & Examples)
Falling three methods is a bullish continuation candlestick pattern. This …

Falling Three Methods Pattern (How to Trade & Examples)

Three White Soldiers Candlestick Pattern (How to Trade & Example)
The “three white soldiers” is a bullish reversal candlestick pattern. …

Three White Soldiers Candlestick Pattern (How to Trade & Example)

Evening Star Pattern (Strategies & Examples)
What is an Evening Star Pattern? An evening star candlestick …

Evening Star Pattern (Strategies & Examples)

Pennant Pattern: Types, How to Trade & Examples
A pennant pattern is a continuation chart pattern that appears …

Pennant Pattern: Types, How to Trade & Examples

Chart Patterns: Types and How to Trade Them?
What Are Chart Patterns? Chart patterns or structures are shapes …

Chart Patterns: Types and How to Trade Them?

Rectangle Pattern: Types, Trading Strategy, Features & Examples
A rectangle pattern is a continuation price chart formation in …

Rectangle Pattern: Types, Trading Strategy, Features & Examples

About The Author

Zafari

Zafari is a professional trader and has been in the financial market since 2014. He has a bachelor of public economics and an MBA. For some reason, he does not show his face. And he loves you all!

Leave a Reply Cancel Reply

  • Recent
  • Popular
  • Comments
  • Tags

Srading.com

QUICK LINKS

  • About
  • Cookies Policy
  • Terms & Conditions
  • Disclaimer
  • Privacy Policy
  • Contact Us

LATEST POSTS

  • Elliott Wave Theory Guide for Beginners
  • Top Continuation Candlestick Patterns
  • Top Reversal Candlestick Patterns
  • 6 Popular Continuation Patterns & How to Trade
  • 8 Popular Reversal Patterns and How to Trade Them

FOLLOW US ON SOCIAL MEDIA

  • Facebook
  • Twitter
  • LinkedIn
  • Instagram
  • Pinterest
  • Telegram
  • Reddit
  • YouTube

Trading financial assets are risky. Everything you read on this website is just for educational purposes or personal opinions only. Read our DISCLAIMER!

Copyright © 2023 Srading.com

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.

Refresh
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By continuing this website or clicking “Accept”, you consent to the use of ALL the cookies.
Do not sell my personal information.
Cookie SettingsAccept
Cookies Policy
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT