Japanese Candlestick Analysis
figure 14.28 Bearish Harami on the Daily Chart of Illinois Toll Works Inc.
Courtesy of Stockcharts.comof the first candlestick. The second small‐bodied candlestick can be of any
color as well.■ (^) The upper and lower shadows are not significant.
■ (^) It is best found in a protracted uptrend that is beginning to display weakness.
■ (^) Its corresponding bullish version is the bullish Harami formation.
Psychology:
■ (^) The bearish Harami formation begins as either a bullish or bearish candle-
stick. The price suddenly gaps into the range of the first candlestick and halts,
indicating that the sellers are now at play in the existing uptrend. Eventually
the sellers take over by driving price down below the low of the first candle-
stick, showing that the bears are now in control.
Trigger, Stoploss, and Confirmation:
■ (^) The trigger is at the low of the first candlestick.
■ (^) To confirm the reversal, price needs to close below this trigger level.
■ (^) The stoploss is placed at the high of the first candlestick or pattern.
■ (^) A buystop entry order may be placed at the high of the candlestick pattern
only if there is evidence that the uptrend is still in effect.
See Figure 14.28.