Cross Harami

The Cross Harami pattern is another version of the Harami in which the 2nd candlestick is a Doji.

The classic Harami is less powerful than the Stars, the Hammer or the Engulfings while the Cross Harami is as powerful as those major reversal patterns.

It can be either a bullish or a bearish reversal pattern. 

Its characteristics are as follows:

• The Harami must appear after a trend, be it bullish or bearish.

• The 1st candlestick must have a long body.

The body of the 2nd candlestick must be a Doji (or almost) that fits within the limits of the body of the 1st candlestick (it is not necessary for the shadows though).
In the case of a bearish reversal such as this example, such a pattern appears, after an uptrend, the day after prices rose, when prices open lower than they closed the day before, and then tend towards balance before finally closing at almost the same level as they opened, within the body of the candlestick of the day before.

This reveals the weakness of the current trend and a strong uncertainty about the future evolution of the market. The outcome of this pattern will be decisive in the evolution of prices. Here, they open gap down the day after, then drop throughout the session. The Harami pattern could then be validated.

It is worth mentioning that some subjectivity can help in technical analysis and that a body as short as that of the 2nd candlestick can be seen as a Doji, given its small size.

In a Harami pattern, the shorter the body of the 2nd candlestick in comparison with that of the 1st one, the more significant the pattern is. The ideal case remains a Cross Harami, which is far more powerful than a simple Harami. The Doji only reinforces the uncertainty signal that prevails on the market.

Since it is more powerful than the classic Harami, the Cross Harami can more easily give rise to position-taking that would be initiated after the pattern is confirmed by the next candlestick. The invalidation threshold can be placed below the new low or above the highest point of the pattern, depending on the direction of the pattern.

All these observations are true for a Cross Harami that would occur after a downtrend.