Harami Candlestick
The Harami — Japanese for “pregnant” — is a two-candle pattern in which a small candle is entirely contained within the body of the previous larger candle. It signals indecision and a potential reversal: the strong directional move of the prior candle is being absorbed. Indian traders watch for Haramis at key levels to time reversals after extended trends.
Key takeaways:
- Two-candle pattern with a small body inside the previous larger body.
- Bullish Harami forms during downtrends; bearish Harami during uptrends.
- Signals indecision and possible reversal.
- Confirmation candle increases reliability.
- A Harami Cross — with a Doji as the inside candle — is a stronger signal.
Pattern structure
- First candle: A large body in the direction of the prevailing trend.
- Second candle: A small body entirely within the range of the first candle’s body.
- Direction reversal: bullish Harami in a downtrend; bearish Harami in an uptrend.
Why the Harami matters
The strong trend candle is followed by a session where prices stay within the prior candle’s body — a sign that the dominant side has lost momentum. The inside candle’s small size reflects indecision. When confirmed, this often precedes a reversal.
Trading bullish and bearish Haramis
- Identify the pattern in the right context (downtrend for bullish, uptrend for bearish).
- Wait for a confirmation candle in the reversal direction.
- Enter with a stop just beyond the prior trend extreme.
- Target the nearest support or resistance level.
- Manage position size — Haramis can fail.
Harami Cross — a stronger signal
If the second candle is a Doji (open = close), the pattern is called a Harami Cross. The Doji’s extreme indecision after a strong trend candle reinforces the reversal hypothesis. Harami Crosses are statistically more reliable than ordinary Haramis.
Common pitfalls
- Treating Haramis in choppy markets as reversals.
- Failing to wait for confirmation candles.
- Ignoring the broader trend or volume context.
- Mistaking small-body candles inside large bodies for engulfing or other patterns.
Indian market context
Haramis show up near sector tops and bottoms, particularly in IT and banking stocks. Combine with RSI divergence and proximity to support/resistance for high-quality setups. F&O traders can structure defined-risk trades around Haramis using vertical spreads.
Frequently asked questions
Is the Harami always reversal?
Most often yes, but failure rates rise in strong trends. Confirmation candles are key.
Does the second candle’s color matter?
A second candle in the opposite color of the first is more bullish/bearish.
What is the difference from an inside bar?
Haramis specifically require the second body to be inside the first body, not just the high-low range.
Are Haramis effective on intraday charts?
Less reliable than daily; intraday noise creates many false signals.
