Harami Cross
Candlefocus EditorA Bullish Harami Cross occurs during a downtrend and can be viewed as a reversal signal of the overall trend. The pattern is formed when a large candle with a distinctly bearish close is followed by a Doji that produces a cross in between the two candles. This pattern signals that the downtrend is likely exhausted and that the market is due for a bounce. The bullish outlook for the market is further confirmed when the price moves higher following the Doji candle.
A Bearish Harami Cross is the opposite pattern and occurs during an uptrend. It is formed when a large bullish candle is followed by a Doji that produces a cross in between the two candles. This pattern signals that the uptrend is likely exhausted and that the market is due for a pullback. The bearish outlook for the market is further confirmed when the price moves lower following the Doji candle.
The Harami Cross is not a very reliable indicator and should not be used as the sole basis of a trading decision. It is important to analyze the pattern in conjunction with other tools and indicators. In addition, Harami Cross should be used to gauge the possibilities of a trend reversal and not to validate a current trend. It is important to note that the pattern is more reliable when the first candle displays a decisive move and the price breaks above or below the Doji candle during confirmation.
Although the Harami Cross does not guarantee a perfect reversal, it does provide a clue for traders to consider and can be used as part of a trading strategy. For example, the Doji close of the Harami Cross can be used to place stop losses or determine appropriate entry or exit points.
Overall, the Harami Cross is an important two-candle price pattern that can be used to gauge the potential of a trend reversal. By considering the magnitude of the two candles and analyzing their relation with other tools, traders can better gauge the reversal possibilities and use the Harami Cross as part of their strategies.