Bullish Harami is a candlestick pattern that works around 59% of the time. The word harami comes from an old Japanese word meaning pregnant. Thus, this pattern got its name because the second small candle that forms within the first candle’s real body looks like a pregnant lady, the first candle being the body, and the second candle representing her belly.
This is how to spot a Bullish Harami pattern on a candlestick chart:
1) Like in all the patterns we are going to discuss, the long-term trend (1-year trend) should be in an uptrend. There is very little chance to succeed if the long-term trend is against your favor. Remember, it is difficult to swim against the tide. Our job as technical chart readers is to wait for the right time when the tide itself is going where we want to go.
2) The intermediate-term trend (3 months trend) should also be preferably bullish.
3) There should be a minor correction or a pullback. Remember, as a trend follower, a minor pullback after a bullish upswing is the best time to enter.
4) The first candle is bearish red with an extended real body.
5) The second candle is bullish with a small real body, preferably a Doji or a star. Its small body is within the first candle’s real body. (We’ll talk about Doji and stars in the upcoming articles. For now, just know that they are variations of a candle with a small body.)
6) It is better if the second green candle forms on the upper portion of the first extended red candle.
7) Although a bullish reversal pattern, the accuracy of the Bullish Harami candlestick pattern is quite low. It is advisable to wait for more confirmation before entering a position.