Understanding the Bearish Harami candlestick pattern

What is the Bearish Harami candlestick pattern?

The Bearish Harami pattern is a simple candlestick formation that signals a possible trend reversal. This two-candlestick pattern appears after a period of price increases. The word ‘harami’ comes from the Japanese word meaning ‘pregnant.’ The pattern looks like a pregnant woman, where the first candle is the ‘mother’ candle and the second small candle is the ‘baby’ inside.

The pattern is easy to see on a chart. The first candle is a large bullish candle with a long green body. This shows that buyers are in control. The market is moving up with strength. The second candle is a small, red, bearish candle. This small candle must be completely inside the body of the first candle with its high and low within the open and close of the large candle. This shows that the market’s momentum has slowed down.

The psychology behind the pattern is interesting. After a long uptrend, buyers are feeling confident. They push the price higher. This creates the large green candle. The next day, the market opens lower and stays in a very narrow range. This forms the small red candle. The lower open surprises the bulls. The small candle shows that sellers are now entering the market and stopping the buyers from pushing the price up further. It is a sign of indecision. The tug-of-war between buyers and sellers is starting to turn.

How to recognise the Bearish Harami pattern

The Bearish Harami pattern has a very specific structure that must follow clear rules.

First, the pattern must appear after an established uptrend. It is a reversal pattern, not a continuation pattern. It is useless in a sideways or choppy market. The first candle is a large bullish one with a big green body. This candle shows strong upward momentum. The larger the body of this candle, the more powerful the preceding trend.

The second candle is a small, bearish, red one. The entire body of this small candle must be contained within the body of the first candle. This is the most crucial part of the pattern. The small candle shows a loss of momentum and a possible shift in sentiment. The second candle can be a doji, a candlestick with a very small body. When it is a doji, the pattern is called a Bearish Harami cross. The cross is an even stronger sign of indecision and a potential reversal.

Volume is a key part of the context. Ideally, volume should be high on the first candle. This shows strong buying. Volume on the second candle should be lower. This indicates that buying interest is slowing down. A surge in volume on the next candle, the confirmation candle, is a good sign. It confirms the new bearish trend.

Here is a quick checklist to confirm the pattern’s validity:

• The market is in a clear uptrend.
• The first candle is a long bullish one.
• The second candle is a small bearish one.
• The second candle is completely contained within the body of the first candle.
• Volume on the second candle is lower than on the first.
• Traders usually wait for a third candle that closes below the harami’s low, for Bearish Harami confirmation. Without this, the pattern is only a warning.

However, as with all chart patterns, the Bearish Harami can produce false signals. It doesn’t guarantee a market reversal, so it’s best used alongside other forms of technical analysis and risk management tools.

Before you use this pattern for trading, learn to recognise it without risking real money. Open a demo account.

What does the Bearish Harami indicate?

The Bearish Harami pattern is a warning signal that the current bullish trend is likely to reverse.

The long bullish candle shows a strong push by buyers while the small bearish one shows that this push has stalled. The market is hesitating. This hesitation is a sign that the bulls are losing control and bears are starting to gain power. They are preventing prices from going higher.

The psychology of traders is at play here. After a long rally, some traders who bought earlier start to take profits. This selling pressure creates the small bearish candle. Other traders see this stall and become cautious. They stop buying. This lack of new buyers allows sellers to gain control. The pattern shows this change in sentiment.

The pattern is more reliable in certain situations. It is especially strong when it forms near a resistance zone. It tells you that the resistance is holding strong and the rally has failed to break through. This makes a reversal more likely. Similarly, if the pattern forms after a very long rally, it is a stronger signal. The uptrend is likely exhausted.

How to identify a Bearish Harami pattern on the chart

Identifying a Bearish Harami pattern requires attention to detail.

First, consider the timeframe. Some find the pattern is more reliable on longer timeframes. Daily charts and 4-hour charts may provide stronger signals. On shorter timeframes, like 15-minute or 5-minute charts, it often produces false signals due to noise and low liquidity.

Second, look for confirmation signals. The pattern itself is only a warning. The Bearish Harami confirmation makes the signal tradable. The confirmation is usually a third bearish candle that closes below the low of the second candle. A big drop in volume on the second candle, followed by an increase on the confirmation candle, is a strong sign.

Also, confirm with other indicators. An overbought signal from the relative strength index (RSI) adds weight to the pattern. It confirms that the market is due for a pullback. A bearish crossover on the moving average convergence divergence (MACD) can also act as confirmation.

Many traders use candlestick scanners. These automated tools can find patterns on a chart and save time. You can set up alerts for Bearish Harami patterns if you cannot monitor the market all day.

Learn more about identifying different candlestick patterns.

Common mistakes in identification

• Ignoring the trend: the pattern must be in an uptrend. Do not trade it in a sideways market.
• Not checking for confirmation: entering a trade without a confirmation candle is risky. The pattern might fail.
• Misinterpreting the second candle: the second candle must be fully inside the body of the first candle. Wicks can be outside, but the body cannot.

Learn more about technical analysis to use other indicators.

Bearish Harami vs similar patterns

It’s important not to confuse the Bearish Harami pattern with other candlestick patterns. Each one has a different meaning.

Bearish Harami vs Bullish Harami

The Bullish Harami is the opposite of the bearish one. It appears in a downtrend and has a large bearish candle followed by a small bullish candle. It signals a potential upward reversal.

Bearish Harami vs Bearish Engulfing

The Bearish Engulfing pattern is a much stronger signal. The second bearish candle is larger than the first bullish one. It completely ‘engulfs’ it. This shows a powerful shift in control from buyers to sellers. While the Bearish Harami shows indecision, the bearish engulfing shows a clear power shift.

Bearish Harami vs Doji

The Doji is a single candle. It has a very small body. It shows complete market indecision. It can be a part of the Bearish Harami cross, but it isn’t the same.

Bearish Harami vs Tweezer Top

The Tweezer Top is a two-candle pattern. Both candles have the same high. They often form at the top of a trend. This shows that the market could not make a new high. It is a signal of a possible reversal.

Bearish Harami vs Dark Cloud Cover

The Dark Cloud Cover is also a bearish reversal pattern. It has a large bullish candle followed by a bearish one. The bearish candle opens above the first candle’s high and closes below the midpoint of the first candle’s body. It does not stay inside the first candle’s range.

Trading strategies with Bearish Harami

Once you have identified the pattern and a Bearish Harami confirmation, you can plan a trade.

A common entry point is after the confirmation candle closes. You can enter a short position at or near the open of the next candle. Some aggressive traders might enter as the confirmation candle is forming. This is riskier. A safer approach is to wait for a close below the low of the harami pattern.

Your stop-loss can be useful for risk management.* A stop-loss order above the high of the first, large bullish candle is a logical placement. If the price goes above this high, the pattern has failed. Your trade idea is no longer valid.

You can set take-profit targets at key support levels. Look for previous swing lows on the chart. These are good places to take profits. Another method is to use Fibonacci retracement levels. Popular targets are the 38.2%, 50%, or 61.8% retracement levels from the previous uptrend.

Like all candlestick patterns, the Bearish Harami doesn’t guarantee a reversal. Always combine it with confirmation tools and strict risk management. Past performance is not a reliable indicator of future results.

*Standard stop-loss orders are not guaranteed. Guaranteed stop-loss orders incur a fee if activated.

Strategy setups with indicators

RSI divergence

The RSI is a potentially powerful signal. If the price is making a higher high but the RSI indicator is making a lower high, it is likely a bearish divergence. A Bearish Harami pattern with this divergence is a very strong signal. It shows that the momentum may truly be running out.

Moving averages (50 EMA, 200 EMA)

The pattern is often considered more significant if it forms near a major moving average. If the price has been trading above the 50 or 200 exponential moving average (EMA), and the harami pattern forms, it can signal a move back to that average.

Bollinger bands

If the harami pattern forms outside or at the upper Bollinger band,® it suggests the price is overextended. A reversal is more likely.

Fibonacci retracement

The pattern can form at a Fibonacci resistance level. For example, the price rallies and then forms a harami pattern exactly at the 61.8% retracement level. This is a very strong signal.

ADX trend filter

The average directional index (ADX) can confirm the strength of the uptrend. If the ADX is falling, it shows the trend is weakening. A Bearish Harami in this context is more reliable.

Volume confirmation

A decrease in volume on the harami candles and a spike in volume on the confirmation candle provide strong evidence of a potential reversal.

Pivot points

If the pattern forms at a key daily, weekly, or monthly pivot point, it adds a layer of confirmation.

Naked chart price action

You can also trade the pattern without indicators. This is called price action trading. You simply look for the pattern to form at a clear resistance zone. The pattern itself, combined with the level, is the trading signal.

Examples of Bearish Harami in the market

Find a strong uptrend on a stock or forex chart by looking for a series of green candles. You could then see a Bearish Harami pattern forming at the top, where the next candle is a long red one. This is the Bearish Harami confirmation. The price then starts to move down, forming a new downtrend. You can enter a short position, as mentioned above.

Now, if a Bearish Harami pattern forms but the next candle is green and closes higher than the harami pattern, there is no confirmation. This means the pattern failed. The uptrend continues. This shows why a confirmation candle is so important.

Let’s imagine that the price is rallying towards a strong resistance level. It hits the level and forms a Bearish Harami pattern. At the same time, the RSI shows a bearish divergence. The price then falls. The combination of the pattern, the resistance, and the divergence creates a very high-probability trading setup.

Pros and cons of the Bearish Harami pattern

Like all trading tools, the Bearish Harami pattern has its strengths and weaknesses. Firstly, it is very easy to spot. The two-candle structure is very simple and even new traders can find it on a chart.

Plus, the pattern works well with other indicators. It is a great signal when combined with other indicators like RSI, volume, or support and resistance levels. Also, it can form for most asset classes. You can find this pattern in stocks, forex, cryptocurrencies, and commodities. It is a universal trading signal.

However, the pattern requires confirmation. It is a moderate-strength pattern and you must wait for Bearish Harami confirmation before trading. In addition, the pattern can give false signals in sideways markets. It is designed for trending markets. Another limitation is that it is weaker than engulfing patterns in isolation. The bearish engulfing pattern is a more powerful signal and shows a stronger shift in momentum. The harami is more about indecision.

Common mistakes to avoid

To trade the Bearish Harami pattern successfully, you must avoid these common errors.

Ignoring context

Always look at the bigger picture. Is there a clear uptrend? Is the pattern forming at a major resistance level? A harami in the middle of a choppy range means nothing.

Entering without confirmation

This is the most common mistake. Traders see the pattern and get excited. They enter a trade too early. The pattern might fail, so wait for the confirmation candle to close.

Confusing it with similar patterns

Make sure you are not looking at a bullish harami or a different pattern. The rules are very specific. The second candle must be inside the body of the first.

Using on small timeframes

The pattern’s reliability is lower on small timeframes. Stick to larger timeframes like daily or 4-hour charts for stronger potential signals.

Ready to use the Bearish Harami pattern on real assets? Open a live account.

Create an account  Open a demo account