Multiple Candlestick Patterns – Part 2 (Harami Patterns)

After learning the Engulfing pattern, Rajesh noticed that sometimes the opposite situation occurred - instead of a large candle swallowing a smaller one, a small candle would appear inside a large one. Curious, he asked Priya what that meant.

Priya replied, “That’s called a Harami pattern.”

Rajesh’s eyes widened. “Wait… what did you just say?”

Priya burst out laughing. “Relax! It’s not what you’re thinking. In Japanese, ‘Harami’ simply means pregnant. The large candle is like the mother, and the small candle inside is like the baby.”

Rajesh shook his head and smiled. “Okay, that makes a lot more sense.”

What Is a Harami Pattern?

A Harami is a two-candle pattern where:

The first candle is large and shows strong movement.
The second candle is small and forms completely within the body of the first candle.

Because of this appearance, it is described as a “pregnant” formation.

The key difference from Engulfing is that the second candle does not overpower the first one. Instead, it shows that momentum is slowing down.

Types of Harami Patterns

There are two types:

Bullish Harami
Bearish Harami

The interpretation depends entirely on the trend before the pattern appears.

Bullish Harami Pattern

A Bullish Harami appears after a downtrend and signals that selling pressure may be weakening.

Structure

First candle: Large bearish candle
Second candle: Small candle within the first candle’s body
The second candle can be bullish or bearish

Psychology Behind Bullish Harami

Priya explained the behaviour step by step:

The market is falling, and sellers dominate.
A strong bearish candle forms.
The next day, the price moves within a narrow range.
The small candle indicates hesitation among sellers.

This shows that the downward momentum is losing strength.

The pattern suggests a possible reversal, but not a guaranteed one.

Trade Approach for Bullish Harami

Because the signal is cautious, confirmation becomes important.

Risk Taker

May enter immediately after the pattern forms
Acts on the early signs of weakening selling pressure

Risk Averse Trader

Waits for a strong bullish candle the next day
Enters only after upward movement confirms

Stop-Loss for Bullish Harami

Stop-loss is usually placed below the low of the pattern (typically the first candle’s low). If price breaks this level, sellers have regained control.

Bearish Harami Pattern

A Bearish Harami appears after an uptrend and signals weakening buying momentum.

Structure

First candle: Large bullish candle
Second candle: Small candle inside the first candle’s body

Psychology Behind Bearish Harami

Priya described the sequence:

The market is rising, and buyers dominate.
A strong bullish candle forms.
The next session shows limited movement.
The small candle indicates hesitation among buyers.

This suggests that bullish momentum may be fading.

Trade Approach for Bearish Harami

Risk Taker

May initiate a short trade immediately

Risk Averse Trader

Waits for a bearish candle next day
Enters only after confirmation of weakness

Stop-Loss for Bearish Harami

Stop-loss is placed above the high of the pattern. If the price moves above this level, the bearish expectation becomes invalid.

Harami vs Engulfing — Key Difference

Rajesh observed, “So Engulfing shows a takeover, but Harami shows hesitation.”

Priya nodded. “Exactly. Engulfing signals strong reversal. Harami signals loss of momentum.”

Engulfing patterns are generally stronger signals, while Harami patterns often require confirmation.

Special Case: Harami with Doji

Sometimes the second candle in a Harami pattern is a Doji. This indicates even stronger indecision in the market.

Such formations often precede significant price movement, but traders still wait for confirmation before acting.

Rajesh laughed. “I don’t think I’ll ever forget this pattern - the name alone is enough.”

Priya smiled. “As long as you remember what it means in trading terms.”

Rajesh replied, “Loss of momentum!”

Priya nodded. “Perfect. That’s exactly what matters.”

Key Takeaways

Harami is a two-candle pattern indicating weakening momentum.
The second candle forms inside the body of the first candle.
Bullish Harami appears after a decline and suggests a potential upward reversal.
Bearish Harami appears after a rise and suggests a potential downward reversal.
Confirmation improves reliability.
Stop-loss is placed beyond the pattern’s extreme.
Harami patterns are generally weaker than Engulfing patterns.
Harami Doji indicates strong indecision.