Harami
The harami is comprised of a long real body and a small real body withinnnits range. The harami is the reverse of an engulfing line. Whereas in an engulfing pattern there is a long candle engulfing the previous real body, a harami is an unusually long real body followed by a very small real body. A harami, after an advance shows that the market must have failed to maintain higher prices.
Candle of the harami can be white or black, all combinations are called harami. However, after a downtrend, a white-black (meaning the first candle is white and the second is black) or a white-white harami is viewed more bullishly than a black-white or a black-black harami. This is because a long white candle is by itself riewed as bullish, so its appearancei n a harami increases the chances that the falling power of the market will come to an end.
The same rationale applies to a harami after an uptrend. A harami with a long black real body can be viewed as more bearish than a harami in an uptrend that has a long white real body. This is because a long black real body after a rally is construed as bearish, so when it is the first part of the harami pattern, the degree of pessimism is increased.
If the entire range, that is, the open, high, low, and close, are within the prior real body, the chances increase for a price reversal.
The smaller the shadows and the shorter the real body of the second candle, the better the signal. If the second candle is a doji instead of a small real body, it increases the probability of a reversal. This combination of a long candle followed by a doji in the first candle's real body is called a harami cross.
Harami is transition period in the market. This means that if a harami in an uptrend is exceeded, it is viewed as a bullish continuation signal. If the price closes under the low of the harami session in a downtrend, then expect more selling pressure.
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