Bullish Harami: Why a “Pregnant” Candle Signals a Reversal
Introduction
Most reversal patterns scream “Buy Now!” with big green candles. The Bullish Harami is different—it whispers.
“Harami” is the Japanese word for “pregnant.” In this pattern, the first large candle is the “mother,” and the second small candle is the “baby.” It indicates that the intense selling pressure has suddenly stopped.
How to Identify a Bullish Harami
- Candle 1 (Mother): A large Red candle showing strong selling momentum.
- Candle 2 (Baby): A small Green candle.
- The Position: The entire body of the small Green candle must fit completely inside the body of the previous Red candle.
The Psychology
- The market has been crashing. Everyone expects another big drop.
- Instead, the price opens higher (gap up) and stays within a tight range.
- The “Baby” candle represents indecision. The sellers have lifted their foot off the gas pedal. While the buyers haven’t taken control yet, the trend has officially paused.
How to Trade It
- Risk: This is a lower probability pattern than the Engulfing, so wait for confirmation.
- Confirmation: Do not buy on the Harami candle itself. Wait for the third candle to break the high of the Harami.
- Stop Loss: Below the low of the “Mother” candle.