Bullish Harami Pattern is formed at the bottom of a downtrend or near a significant support. This pattern is made up of two Candlestick or can say it takes 2 days for this pattern to formed. First Day: A Long bearish candlestick is formed, shown in red in the fig below. Second Day: A small bullish candlestick is formed shown in green in the fig below.
The pattern got its name because in Japanese: Harami means pregnant or body within. In this pattern a small bullish candlestick is formed on day 2 which lies within the body of the bearish candle formed on day 1. Or people say the big bearish candlestick of Day 1 gives an impression of a lady and the small bullish candlestick formed on Day 2 is the protruding baby bump of that lady.
For this pattern to formed it is very important that:
a.The open price of the Day 2 candlestick is higher than the close price of Day 1candlestick.
b.The close price of the Day 2 candlestick is lower than the open price of Day 1 candlestick.
Bullish Harami pattern is considered to be a trend reversal pattern, giving investors the buy signal indicating that the bear run is over and bull is taking over the market.
The size and location of the bullish candlestick formed on Day 2 will tell more about the magnitude of this pattern. The bigger bearish candle of Day1 and a comparably small bullish candle of Day 2 represents strong trend reversal. Similarly if the Bullish candle formed on Day 2 is located near the bottom of the Bearish candlestick formed on Day 1 then one can say the uptrend may be slow, but if it lies in the mid or near the top side of the bearish candle one can say the reversal is moderate to strong.
Precaution to be taken while utilizing this Pattern:
1.It is important to reconfirm the pattern by integrating this pattern with the study of other technical indicator.
2.Like if this pattern is formed at the bottom of a downtrend together with overbought condition then it further strengthen strong buy signal. If it is formed in an uptrend it is of no significance.
Volume plays important role is the confirmation of this pattern. A high volume or a gap up next day reconfirms further trend reversal.
Now we have learnt what Bullish Harami candlestick is, its time to see them in real life. Our website provides free stock screening based on Bullish Harami. Candlestick Pattern.
Example of Bullish Harami Candlestick Pattern: Reliance Industries Ltd