Bullish Harami Candlestick Pattern

The bullish 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. The second candle is bullish, while the first one is bearish. 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.

A Bullish Harami.

A Bullish Harami.

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

As you look at the trade in action below, you can see that the markets had been falling for some time. However, we had an impulsive red candle at the end of the move lower, followed by a bullish harami, as we ran out of the downward momentum. The second candle of course is positive, and that is the first sign that perhaps the sellers are starting to run out of conviction. Once we broke above the bottom of the range of the second candle, you can see that the market then started to go much higher.

A trade based upon the bullish harami.

A trade based upon the bullish harami.

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