Bearish Harami Cross Candlestick Pattern (Backtest)
Last Updated on April 18, 2023
The introduction of the candlestick chart in the 18th century has done a lot to simplify how we’ve come to know the once complex trading world.
Now, traders from all walks of life can analyze charts in their comfortable timeframes and make sense of what’s going on in the market. Even more, they can predict what might happen next by recognizing some patterns that have been proven to be tradeable.
One of these patterns is the Bearish Harami Cross and in this article, we will take a look at what the pattern is, how to identify, and profit from it, common mistakes to avoid while trading it, and a lot more.
What is A Bearish Harami Cross Pattern?
A Bearish Harami Cross pattern is a bearish reversal candlestick pattern that consists of two candlesticks. It is formed when the market is trending upwards, but then the bears take control and push the price down. The pattern gets its name from the Japanese word “harami,” which means “pregnant” because the second candlestick is contained within the body of the first candlestick.
The first candlestick is a large bullish candlestick that closes higher than the second candlestick.
The second candlestick in the pattern is a small body that forms within the previous uptrend. This candlestick is typically a Doji or a spinning top, which indicates indecision or a lack of commitment from the bulls or the bears.
The Bearish Harami Cross pattern is often seen as a sign that the uptrend is coming to an end. It is typically more reliable when it appears after a long uptrend or at a resistance level.
However, the Bearish Harami Cross pattern is a reversal pattern, not a continuation pattern. This means that it signals a potential reversal in the trend, but it does not guarantee it. It is always important to confirm the pattern with other technical analysis tools and techniques before making any trading decisions.
How Do You Identify A Bearish Harami Cross Candlestick Pattern?
To identify a Bearish Harami Cross pattern, first look for a long white candle on the chart. This indicates that there was strong buying activity during the time period represented by the candle, with the price rising significantly. The second candle, the black one, should be smaller in size and completely contained within the body of the first candle. This suggests that buying momentum has slowed and the price may be starting to fall.
It’s important to note that the Bearish Harami Cross is not a guarantee of a downward trend, but rather a potential signal that traders should be aware of. It’s always a good idea to confirm any trend predictions with other technical analysis tools and to consider the overall market conditions before making any trades.
Another variation of the Bearish Harami Cross is the bearish harami, which is similar but with a Doji candle as the second candle instead of a black one. A Doji candle is one where the opening and closing prices are nearly equal, resulting in a small body with long wicks on either side.
What are the characteristics of a bearish harami cross candlestick pattern?
The pattern can look like this:
If we zoom out such a pattern can take a form like this:
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How Does A Bearish Harami Cross Candlestick Pattern Work?
To understand how this pattern works, it’s important to first understand the basic elements of a candlestick chart. Each candlestick on the chart represents a specific period, such as one day or one hour, and it shows the open, high, low, and close prices for that time period. The body of the candlestick is the area between the open and close prices, and the wick, or shadow, represents the high and low prices for the time period.
The Bearish Harami Cross pattern is characterized by the small bearish candle being contained within the large bullish candle. This indicates that the bulls, or buyers, were initially in control, but the bears, or sellers, eventually took over and were seeking to push the price down.
The Bearish Harami Cross is not a standalone pattern and should be used in conjunction with other technical analysis tools and indicators to confirm a potential trend reversal. Additionally, it’s essential to understand the context of the market and the underlying fundamentals that may be driving the price action.
What Is The Difference Between A Bullish Harami Cross And A Bearish Harami Cross?
A Bullish Harami Cross and a Bearish Harami Cross are two types of candlestick patterns that are commonly used in technical analysis to identify potential trend reversals in the financial markets. These patterns are formed by the combination of two candlesticks and are named based on the direction of the reversal they suggest.
A Bullish Harami Cross is a bullish reversal pattern that consists of a large black candlestick followed by a small white candlestick that is completely contained within the body of the black candlestick. This pattern suggests that the bearish sentiment that was present in the market during the formation of the black candlestick has weakened, and there is now a higher probability of the price rising.
On the other hand, a Bearish Harami Cross is a bearish reversal pattern that consists of a large white candlestick followed by a small black candlestick that is completely contained within the body of the white candlestick. This pattern suggests that the bullish sentiment that was present in the market during the formation of the white candlestick has weakened, and there is now a higher probability of the price falling.
What Are The Risks Associated With Trading A Bearish Harami Cross Candlestick Pattern?
While the Bearish Harami Cross can be a useful tool for traders to identify potential trend changes, it is important to understand that there are also risks associated with trading this pattern. Here are some of the main risks to consider:
One of the main risks with any candlestick pattern is the potential for false signals. This means that the pattern may not always accurately predict market movements and can lead to incorrect trades. It is important to use the Bearish Harami Cross in conjunction with other technical analysis tools and indicators to increase the likelihood of accurate signals.
Another risk to consider is market volatility. If the market is particularly volatile, the Bearish Harami Cross pattern may be less reliable. This is because the pattern relies on the relative size of the two candles, and if the market is moving rapidly, the size of the candles may not accurately reflect the underlying market conditions.
It is also important to note that the Bearish Harami Cross is not a particularly reliable pattern on its own. While it can be a useful tool for identifying potential trend changes, it is important to use it in conjunction with other technical analysis techniques and indicators to increase the likelihood of accurate signals.
Does The Bearish Harami Cross Candlestick Pattern Always Indicate A Bearish Reversal?
While the Bearish Harami Cross pattern can be a useful tool for identifying potential market reversals, it is important to remember that it is only one factor to consider when making trading decisions. Many other factors can influence market trends, such as economic data, company news, and global events. It is always important to consider the full range of market conditions before making any trades. Hence, it doesn’t always indicate a bearish reversal.
How Reliable Is The Bearish Harami Cross Candlestick Pattern?
No single candlestick pattern is a guarantee of future market movements. Technical analysis, including the use of candlestick patterns, is just one tool that traders can use to try to predict market trends. It’s always a good idea to use multiple indicators and consider the larger market context before making any trading decisions.
That being said, the Bearish Harami Cross can be a useful tool for traders to keep in their toolkits. When combined with other indicators and analyses, it can help traders identify potential bearish reversals and make informed decisions about their trades.
It’s also worth noting that the reliability of any candlestick pattern can vary depending on the specific market and timeframe being analyzed. For example, a pattern that has a high success rate on a daily chart may not be as reliable on a 5-minute chart. As with any technical analysis tool, it’s important to backtest and experiment to determine what works best in your specific trading strategy.
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What Are The Implications Of A Bearish Harami Cross Candlestick Pattern?
The implications of a Bearish Harami Cross pattern are that it may indicate a potential trend reversal from an uptrend to a downtrend. It suggests that the bulls, or buyers, are losing control and the bears, or sellers, are taking over. This pattern can be a warning sign that the stock’s price may soon start to decline.
However, it’s essential to consider the overall market conditions and any fundamental factors that may be impacting the stock’s performance.
It’s worth noting that a Bearish Harami Cross pattern can also occur during a downtrend, but in this case, it may suggest a potential trend continuation especially after price retraces into a key resistance zone.
How Does The Bearish Harami Cross Candlestick Pattern Compare To Other Reversal Patterns?
In comparison to other reversal patterns, the Bearish Harami Cross is generally considered a less reliable signal on its own. This is because it can be easily overshadowed by other, more prominent candlestick patterns or technical indicators.
How Can A Bearish Harami Cross Candlestick Pattern Be Used To Identify Trend Reversals?
To use the Bearish Harami Cross as a trend reversal indicator, traders will look for it to form after an uptrend. This indicates that the uptrend may be coming to an end and that the market may be ready to move in the opposite direction.
It’s important to note that the Bearish Harami Cross, when used in conjunction with other analysis tools, can be a valuable tool for identifying potential trend reversals.
What Are Some Common Mistakes To Avoid When Trading The Bearish Harami Cross Candlestick Pattern?
Here are a few mistakes to avoid when trading the Bearish Harami Cross:
Failing To Confirm The Pattern With Other Indicators
It’s important to confirm the Bearish Harami Cross with other technical indicators or analysis techniques, such as trend lines or moving averages, to increase the reliability of the pattern.
Ignoring The Larger Trend
The Bearish Harami Cross is a reversal pattern, but it’s important to pay attention to the larger trend and make sure it aligns with the bearish reversal indicated by the pattern.
Underestimating The Power Of The Pattern
While the Bearish Harami Cross is a reversal pattern, it can still be a powerful indicator. Don’t underestimate its potential to signal a significant change in market sentiment.
By avoiding these common mistakes, traders can increase their chances of successfully using the Bearish Harami Cross as a tool in their trading strategy.
How Do You Confirm A Bearish Harami Cross Candlestick Pattern?
To confirm a Bearish Harami Cross pattern, it is important to consider the following:
- Look for the pattern to occur after a sustained uptrend. This will increase the likelihood that the pattern is a genuine reversal signal.
- Watch for a bearish candle to follow the large bullish candle. This suggests that the bears are gaining strength and may be able to push the price down.
- Check the volume of the bearish candle. If volume increases during the formation of the Bearish Harami Cross, it suggests that there is strong selling pressure and that the pattern is more likely to be reliable.
- Look for the bearish candle to have a lower open and close, with the close being within the body of the previous bullish candle. This is a key characteristic of the Bearish Harami Cross pattern.
How Does The Size Of The Bearish Harami Cross Candlestick Pattern Affect Its Reliability?
One factor that can affect the reliability of this pattern is the size of the second candle. A smaller second candle may indicate a lack of bearish conviction, potentially making the pattern less reliable. On the other hand, a larger second candle may indicate a stronger bearish sentiment, making the pattern more reliable as a signal of a potential trend reversal.
How Can A Trader Capitalize On A Bearish Harami Cross Candlestick Pattern?
Traders can capitalize on the Bearish Harami Cross pattern by keeping an eye out for this pattern in their charts and being prepared to act on it when it appears. One way to do this is to set up alerts or notifications on your trading platform to alert you when this pattern is forming. This can help you stay on top of potential trend changes and take advantage of any potential opportunities that may arise.
Look below to find answers to common questions you may have about trading this great candlestick pattern:
What Types Of Stocks Are Best Suited For A Bearish Harami Cross Candlestick Pattern Trading Strategy?
The Bearish Harami Cross pattern is typically best suited for trading stocks that are in a prolonged uptrend and considerably overbought, showing bearish momentum. However, there is only way to find out any candlestick pattern has any predictive value: backtest.
How Long Does The Bearish Harami Cross Candlestick Pattern Last?
The Bearish Harami Cross candlestick pattern typically lasts for one or two trading sessions. It is a short-term pattern that is typically used as a reversal signal, signaling a potential change in trend direction.
Is The Bearish Harami Cross Candlestick Pattern A Reliable Signal?
The reliability of the Bearish Harami Cross candlestick pattern can vary, and traders need to use it in conjunction with other technical analysis tools and indicators to confirm the signal.
Is The Bearish Harami Cross Candlestick Pattern Considered A Safe Trading Technique?
Trading based on the Bearish Harami Cross candlestick pattern alone is not considered a safe trading technique, as it is important to consider other factors such as the overall market trend and the fundamentals of the stock being traded.
What Is The Best Time Frame For Trading The Bearish Harami Cross Candlestick Pattern?
The best time frame for trading the Bearish Harami Cross candlestick pattern will depend on the trader’s trading style and risk tolerance. Some traders may prefer to use it on shorter time frames such as the 1-hour or 4-hour chart, while others may use it on daily or weekly charts. However, a rule of thumb is the higher the timeframe, the stronger the pattern.
Are There Any Variations Of The Bearish Harami Cross Candlestick Pattern?
There are several variations of the Bearish Harami Cross candlestick pattern, including the Bearish Harami, the Bullish Harami Cross, and the Harami Cross Doji. These patterns are similar to the Bearish Harami Cross, but they indicate a potential reversal in the opposite direction, either bullish or neutral.
The Bearish Harami Cross is a valuable candlestick pattern for traders to consider in their analysis. By keeping an eye out for this pattern and acting on it when it appears, traders can potentially capitalize on potential trend reversals and take advantage of any opportunities that may arise. As with any trading strategy, it’s important to use this pattern in combination with other forms of analysis and to always manage risk carefully.