Harami Cross

Posted on by user

Harami Cross

A harami cross is a two-candlestick Japanese candlestick pattern that can signal a potential trend reversal. It consists of a large candlestick in the direction of the prevailing trend followed by a doji whose real body is completely contained within the prior candle’s body. The pattern can be bullish (after a downtrend) or bearish (after an uptrend).

How to identify it

  • First candle: a long candle that continues the current trend (down for bullish harami cross, up for bearish).
  • Second candle: a doji (opens and closes at nearly the same price) whose body lies entirely within the real body of the first candle.
  • Location: the pattern is meaningful only when it appears after an established uptrend or downtrend.

Bullish vs. Bearish Harami Cross

  • Bullish harami cross
  • Appears after a downtrend.
  • First candle: large bearish candle (strong selling).
  • Second candle: doji contained within the first candle’s body, indicating seller indecision.

  • Confirmation: price moves higher after the pattern (e.g., closes above the first candle’s open).

  • Bearish harami cross

  • Appears after an uptrend.
  • First candle: large bullish candle (strong buying).
  • Second candle: doji contained within the first candle’s body, indicating buyer indecision.
  • Confirmation: price moves lower after the pattern.

Factors that increase reliability

  • Location near key technical levels:
  • Bullish pattern near major support increases odds of a meaningful upside move.
  • Bearish pattern near major resistance strengthens the reversal signal.
  • Supporting indicators:
  • RSI moving out of oversold (for bullish) or down from overbought (for bearish).
  • Confluence from other indicators or chart patterns.
  • Price confirmation: wait for one or more follow-through candles in the expected direction before acting.

How traders use the harami cross

  • As an alert: many traders treat the harami cross as a warning of a possible reversal and look for confirmation.
  • Entry triggers:
  • Long: enter when price breaks above the open of the first (large) bearish candle or on a confirmed move higher.
  • Short: enter when price drops below the open of the first (large) bullish candle or on a confirmed move lower.
  • Stop-loss placement:
  • Long: below the low of the doji or below the low of the first candle.
  • Short: above the high of the doji or above the high of the first candle.
  • Exits and profit targets:
  • The pattern itself gives no specific target. Use trailing stops, Fibonacci targets, support/resistance, or a predefined risk/reward plan.

Example (summary)

A bearish harami cross formed after price moved into a resistance area. A large bullish candle was followed by a doji contained within its body. Price subsequently declined, confirming the bearish harami cross and offering an opportunity to exit long positions or enter shorts. The move continued lower for several weeks before later reversing and breaking above the prior resistance.

Key takeaways

  • The harami cross signals potential trend exhaustion and possible reversal but requires confirmation.
  • It consists of a trend-following large candle followed by a doji contained inside the prior real body.
  • Reliability improves when the pattern occurs at key support/resistance or is supported by other indicators.
  • Use clear entry rules, disciplined stop placement, and an exit method independent of the pattern.