Trade with Bullish Harami Candlestick Pattern
How to Trade with Bullish Harami Candlestick Pattern? Multiple candlestick formations known as the Harami, which in Japanese means “pregnant,” are seen as reversal patterns. The 1st candlestick is known as the “mother” because it represents the smaller second candlestick with a more prominent natural body, giving the impression of a pregnant mother.
In contrast to the engulfing pattern, the Harami candlestick pattern allows for identically colored candlesticks. This design similarly consists of two candlesticks. However, the first candlestick in this pattern is enormous, and the second candlestick is smaller.
What is a Harami Candlestick Pattern?
The Harami candlestick formation is a reversal pattern that consists of two candles. The first candle is tall and represents a continuing trend, but the second candle is notably shorter and has a different color, which shows that the trend has changed. This is a result of the bodies of both candles must completely enclose one another.
The Harami candlestick pattern originates from Japan and is particularly popular among cryptocurrency traders. Traders can take advantage of its easy identification and small risk window. Trading the Harami pattern so frequently yields an excellent risk-to-reward ratio. There are two types of Harami candlestick patterns:
- Bearish Harami Candlestick Pattern
- Bullish Harami Candlestick Pattern
In this article, learn more about the Bullish harami candlestick pattern.
Bullish Harami Candlestick Pattern
A reversal pattern that appears at the bottom of a downtrend is the Bullish Harami candle pattern. It is composed of a large bearish candle with a tiny body followed by a bullish candle with a petite body encased in the previous candle’s body.
The little bullish candle “gaps” up to open close to the mid-range of the preceding candle, indicating a change in momentum. The Bearish Harami, at the top of an uptrend, is the opposite of the Bullish Harami.
How to Recognize a Bearish Harami Candlestick Pattern?
Although the Bullish Harami will appear differently on a stock chart than on the 24-hour Forex markets, the same strategies may be used to spot the pattern.
- Find a current downward trend.
- Watch for signs that the momentum is slowing or changing.
- Please ensure the body of the little green candle is no larger than 25% of the bearish candle that came before it. The green candle will appear halfway up the preceding candle when stocks gap higher. The two candles will often be displayed side by side on forex charts.
- Keep in mind that the body of the current bullish candle completely encloses the preceding bearish candle’s body.
- Use critical levels of support or supporting indicators to look for convergence.
Knowing where to look for the Harami pattern in the crypto-currency market is crucial now that you know its shape and structure.
As we can see in the Ethereum chart above, bullish Harami formations mark the beginning of fresh bull trends. As a result, you can only locate them following a downward trend. Another significant, bearish candle precedes the onset of the bullish Harami pattern, which follows a string of lower highs and lower lows. As a result, the downward trend has quickened and could be capitulating.
A brief rally starts but stalls as the candle burns out. In other words, the sellers are exhausted, but the buyers have yet to come. This carves the more minor, smaller second candle of the design, encircled by the first candle’s body.
What Does a Bullish Harami Candlestick Pattern Signals?
Most market participants are gloomy since the market is in a downtrend. Buyers are waiting for a sign that the negative trend has ended while sellers control the market.
There is no indication of a positive market attitude when the first candle of the bullish harami forms. Similar to previously, intense selling pressure drives the market further lower.
The market, however, starts the next day with a good gap. The bulls now have an opportunity to reverse the trend because the bears appear to have lost the upper hand overnight. The market has selling pressure for the rest of the day, but buyers always step in to stop the market from falling. As a result, the bulls’ prices are slightly raised, although not over the preceding bar’s open.
This is a significant indication of strength that encourages more buyers to place buy orders, supporting the upcoming uptrend. Overall, the bullish harami pattern is evidence that bulls succeeded in creating an upward gap in the market and maintaining that level for the remainder of the day.
The Bullish Harami Cross
Traders frequently seek after the second candle in the pattern to be a Doji. Doji’s indication of market uncertainty is the cause of this. The Doji candle, which appears close to the bottom of a downtrend, gives a bullish indication. Thus the color of the candle (black, green, or red) is not very significant. The bullish advance (if confirmed) is only getting started. Therefore the Bullish Harami Cross also offers a tempting risk to reward potential.
4 Bearish Harami Cross Signs
- It usually shows up when there is a downward trend.
- Hints that the trend is changing from one that is down to one that is neutral or upward.
- The body of the first candle is a solid red body. This indicates that the red candle is noticeably big.
- The second candle is fashioned like a green Bullish Doji, which denotes that it stays inside the red candle’s range and has a cross-like shape. As a result of the opening and terminating occurring practically simultaneously, it has a cross-like form.
Trade with the Bullish Harami Candlestick Pattern
Seeing the bullish harami pattern on a trading chart is simple and quick. Finding the pattern alone is typically insufficient; the trader must combine it with other signs to support it. For example, the RSI, MACD, and Fibonacci ratios may validate the bullish harami pattern and identify advantageous entry and exit points.
RSI, MACD, and the Bullish Harami Chart Pattern
Since the bullish harami pattern indicates a trend reversal, the trader should use another momentum indicator to verify the reversal. Two of the most crucial momentum indicators trader may use to spot the bullish harami patterns are the MACD and RSI. Therefore, we added the RSI and MACD to the chart below to verify the price reversal.
The bullish Harami appears and is above the 30 levels simultaneously with the RSI crossing, as seen in the GBP/USD 30-min chart.
On the other side, the MACD crossing happens even before the pattern does, which strongly indicates that the bearish trend’s momentum has peaked.
The Fibonacci Retracements and the Bullish Harami Chart Pattern
It could be challenging to trade using a bullish harami pattern and Fibonacci retracement levels together. To draw Fibonacci levels accurately, the trader will need to locate the highs and lows of the prior trend, and occasionally, He could even need to adjust the timeline.
On the other hand, Fibonacci support and resistance levels can assist the trader in confirming the trend reversal, and identifying the optimal entry-level can determine the limits of the prior trend. From the highest to lowest prices from the previous trend, we have established Fibonacci retracement levels in the chart below.
You can see that the 61.8% level aids in determining a suitable entry level. Additionally, the stop-loss level might be set at 78.6%, and the take-profit targets could be 50% and 38.2%.
Traders in crypto-currencies frequently use Bullish Harami candlestick patterns. The Bullish Harami pattern is regularly seen in crypto-currency markets, and trading it is simple. The limited risk range and favorable profit possibilities that the Bullish Harami pattern provides appeal to traders.
However, the pattern only ensures profitable trades like any other technical analysis technique. Therefore, the Bullish Harami pattern should be sought within the context of the appropriate trend, and its use should be combined with other trading techniques for the most significant outcomes.