Bearish Harami Candlestick Pattern

The bearish harami is a candlestick formation that actually has two separate candles. What makes a harami is a two candlestick formation that features a large range on the first candlestick, and then a candlestick that has a range that is completely engulfed by the original candle. This pattern features a positive candle followed by a negative one. This is essentially the reverse of and engulfing situation, as the range is shrinking, meaning that momentum is running out. As a side note, the name “harami” is from the Japanese term for baby, as it looks like a pregnant woman.

Bearish Harami

Bearish Harami

The second component of this particular formation is that it comes at the end of an uptrend. This formation shows that the momentum is running out for the buyers, and that things have indeed started to shift back towards the sellers and their agenda. You have to look at this as a suggestion of where momentum is failing, and therefore it makes sense that the buyers will have run out of enough momentum to push the markets higher. This is simply a matter of exhaustion.

As you look at the trade in action below, you can see that the markets had been rising for some time. However, we had an impulsive green candle at the end of the move higher, followed by a bearish harami, as we ran out of the momentum. The second candle of course is negative, and that is the first sign that perhaps the buyers are starting to run out of enthusiasm and strength. Once we broke down below the bottom of the range of the second candle, you can see that the market then fell.

A trade using the Bearish Harami formation.

A trade using the Bearish Harami formation.

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