How to Profit from the Bearish Harami Candlestick Pattern

The Bearish Harami candlestick pattern signals a potential shift in momentum. It appears when a large bullish candle is followed by a much smaller bearish candle that stays within the first candle’s body. Traders see this as a warning sign that the uptrend might be losing strength.

Understanding this pattern can help you recognize possible reversals before they fully develop. This guide explains how the Bearish Harami works, what it tells traders about market sentiment, and how to use it effectively in trading.

The Bearish Harami is a two-candle reversal pattern that forms after an uptrend. It consists of a large bullish candle, followed by a smaller bearish candle that fits entirely within the first candle’s body.

This pattern suggests that buying momentum is slowing down. The second candle shows that buyers are struggling to push the price higher, and sellers may be starting to take control. Traders typically wait for further confirmation before acting on the signal.

Key Characteristics:

• Forms after an uptrend, signaling possible exhaustion of buying pressure.
• The first candle is large and bullish, showing previous buying strength.
• The second candle is small and bearish, staying within the first candle’s range.
• Indicates a potential trend reversal, but confirmation is needed.

The Bearish Harami candlestick pattern is illustrated below.

• Forms after an uptrend, signaling a potential reversal.
• The first candle is large and bullish, showing prior buying strength.
• The second candle is small and bearish, indicating a loss of momentum.
• Suggests that buyers are losing control, but confirmation is needed before entering a trade.

The Bearish Harami reflects a shift in sentiment. The first candle shows strong buying, but the second, much smaller bearish candle signals hesitation. Buyers were dominant but failed to sustain momentum, allowing sellers to step in.

This pattern often appears when bullish enthusiasm starts fading. If the next candles confirm the reversal with lower closes, it suggests that market sentiment is turning bearish.

Market Conditions

The Bearish Harami is most effective when it appears after a strong uptrend, signaling that buying pressure may be fading. It is more significant when it forms at a key resistance level, as this suggests that sellers are stepping in. This pattern may indicate temporary hesitation in sideways markets rather than a full trend reversal.

Volatility Considerations

In high-volatility markets, the Bearish Harami may produce false signals, as sharp price swings can cause temporary reversals before the trend resumes. In low-volatility environments, this pattern can carry more weight, as price action tends to be more controlled and predictable.

• Placement: Stop-loss should be placed above the high of the Bearish Harami pattern to protect against false breakouts.
• Entry strategy: Traders often enter after bearish confirmation, such as a breakdown below the second candle’s low.
• Profit target: Use support levels or a risk-reward ratio (e.g., 2:1) to set an appropriate exit.

To trade the Bearish Harami in a systematic approach:

1. Identify a strong uptrend before the pattern forms.
2. Detect a Bearish Harami with a small bearish candle contained within the previous bullish candle.
3. Require confirmation: Enter short only if the next candle confirms bearish movement.
4. Set stop-loss above the Bearish Harami’s high.
5. Backtest before using real capital.

Traders should always test historical data before using this pattern in live trading.

To trade the Rising Three Methods in a systematic approach:

1. Identify a strong uptrend before the pattern forms.
2. Detect a large bullish candle, followed by three smaller bearish candles staying within its range.
3. Require confirmation: Enter long only if the final bullish candle closes above the first candle’s high.
4. Set stop-loss below the first candle’s low.
5. Backtest before using real capital.

Traders should always test historical data before using this pattern in live trading systems.

Below is a simple AFL script to detect the Bearish Harami in Amibroker:

// Bearish Harami AFL Code for Amibroker

_SECTION_BEGIN(“Bearish Harami”);

FirstBullish = Ref(Close, -1) > Ref(Open, -1);

SecondBearish = Close < Open;

SmallCandle = (High – Low) < (Ref(High, -1) – Ref(Low, -1)) * 0.5;

Contained = Open < Ref(Close, -1) AND Close > Ref(Open, -1);

BearishHarami = FirstBullish AND SecondBearish AND SmallCandle AND Contained;

PlotShapes(IIf(BearishHarami, shapeStar, shapeNone), colorRed, 0, High);

_SECTION_END();

This script finds Bearish Harami patterns and marks them with a red star.

The Bearish Harami candlestick is a potential bearish reversal pattern that appears after an uptrend. 

It signals that buyers are losing momentum, and sellers may be preparing to take control. However, confirmation from the next few candles is crucial before making any trading decisions.

Using risk management and waiting for confirmation can help traders avoid false signals. If you want to incorporate this pattern into your strategy, test it in different markets before using it in live trading.

Links to articles about other Candlestick Patterns

1. Doji
2. Hammer
3. Inverted Hammer
4. Bullish Engulfing
5. Bearish Engulfing
6. Morning Star
7. Evening Star
8. Shooting Star
9. Hanging Man
10. Piercing Pattern
11. Dark Cloud Cover
12. Three White Soldiers
13. Three Black Crows
14. Dragonfly Doji
15. Gravestone Doji
16. Spinning Top
17. Marubozu
18. Tweezer Top
19. Tweezer Bottom
20. Bullish Harami 
21. Bearish Harami
22. Rising Three Methods
23. Falling Three Methods
24. Bullish Abandoned Baby 
25. Bearish Abandoned Baby 
26. Bullish Kicker 
27. Bearish Kicker
28. Three Inside Up
29. Three Inside Down
30. Upside Gap Two Crows
31. Mat Hold
32. Upside Tasuki Gap
33. Downside Tasuki Gap