Harami

The Harami pattern, also called “pregnant woman”, is a two-candlestick reversal pattern. It is less powerful than the Hammer, the Hanging Man or the Engulfings… but it should not be neglected.

It reveals a break in the current trend, be it bullish or bearish. It can allow the trend to resume or give rise to a trading range or a reversal. The 1st candlestick represents the pregnant woman and the 2nd the baby.

Its characteristics are as follows:

• The Harami must appear after either an uptrend or a downtrend.

• The 1st candlestick must have a long body.

• The body of the 2nd candlestick must be fully encompassed within the body of the 1st one (but not necessarily the shows).

• Both candlesticks can have the same colour or not.

In the case of a bearish reversal such as this example, such a pattern occurs after a uptrend (a very bullish one here since gaps can be observed throughout), the day after prices rose, when prices open lower than they closed the day before and tend towards balance before finally closing within the body of the Japanese candlestick of the day before. This shows a weakness in the current trend. The outcome of this pattern will be decisive in the evolution of prices. In this case, the day after, prices open lower, they rise again to test the highs without reaching them before finally closing lower. The Harami pattern could then be validated.

This case is the typical example of two bodies with opposite colours, showing that it is not essential to the pattern.

Although the Harami is not a very powerful reversal pattern, it should still be taken into account since it may slow the trend and other technical signals should confirm the Harami. Here, the next Japanese candlestick is a Hanging Man, although its lower shadow is a bit short, it reinforces the warning of the Harami.

The shorter the body of the 2nd candlestick is in comparison to that of the 1st one, the more significant the pattern. The ideal case is that of a Cross Harami. A short body reinforces the uncertainty signal that prevails on the market.

Since it is not very powerful, the Harami cannot give rise to position-taking but it strongly emphasizes the weakness of the trend. Nevertheless, if other signals confirmed the pattern (support, resistance…), a position could be initiated after the confirmation of the pattern by the next Japanese candlestick.

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