The Harami pattern is made up of two candlesticks, where the first is a large candlestick and the second is a smaller one whose body is fully contained within the body of the first candle. The term "Harami" translates to "conception" or "pregnant" in Japanese.

The first candlestick is referred to as the "mother," characterized by a large real body that completely encompasses the smaller second candlestick, resembling a pregnant figure. The second candlestick can take the form of a Spinning Top or a Doji.

There are two variations of the Harami candlestick pattern:

• Bullish Harami: A bullish reversal pattern that occurs following a downtrend.
• Bearish Harami: A bearish reversal pattern that appears after an uptrend.

If the second candlestick is a Doji, the pattern is referred to as a Harami Cross.

To identify a general Harami pattern, look for the following criteria:

• There should be an existing trend, either up or down.
• The first candle must align with the trend's direction, sharing the same color and featuring a long body.
• The second candle must be entirely within the body of the first candle, opening and closing within it. Its body can be of any color and will be smaller. Only the body needs to be contained; the wicks do not matter.

Bullish Harami

In a Bullish Harami, the price is in a defined downtrend. The first candle is a large bearish candle, while the second is a smaller bullish candle. When the second candle opens, the price gaps up after the first candle, but its body remains within the body of the first candle.

Bearish Harami

In a Bearish Harami, the price is in a defined uptrend. The first candle is a large bullish candle, and the second is a smaller bearish candle. When the second candle opens, the price gaps down after the first candle, but its body is contained within the body of the first candle.

The Harami pattern signifies a potential trend reversal and must occur within an existing trend. The color of the second candlestick is not crucial; it typically contrasts with the first candlestick, but this is not always the case.

What matters is the Harami's position within the current trend and the trend's direction, which should be evaluated in the context of the chart. If the Harami appears near a support or resistance line, or a trend line, its significance increases.

When the Harami emerges in an uptrend, it signals a bearish indication, while in a downtrend, it suggests a bullish signal. The formation of the Harami, along with the small real body of the second candlestick, indicates indecision and uncertainty following a rapid movement in the trend, suggesting a loss of momentum.

In an uptrend, this indicates that buyers have not capitalized on the surge in activity, failing to close the second candlestick near the high of the previous one. A Bullish Harami's first candle shows that the downtrend is still in play, with bears pushing prices lower. However, bulls then take control, opening the price higher than the previous candle's close, leading to an upward movement.

In a downtrend, it indicates that sellers have not managed to close the second candlestick near the low of the previous one. A Bearish Harami's first candle suggests that the uptrend is ongoing, with bulls driving prices higher. Yet, bears step in, causing the price to open lower than the previous candle's close, as bulls take profits before the price closes lower for the session.

In both scenarios, this weakness suggests that a trend reversal may be on the horizon.

To analyze a specific Harami candlestick, consider the following:

• The longer the candles, the more significant the potential reversal.
• In a Bullish Harami, the higher the second candle closes relative to the black candle, the greater the likelihood of a reversal.
• In a Bearish Harami, the lower the second candle closes compared to the white candle, the more probable a reversal becomes.