Technical Analysis -- Episode 19: Bullish harami

Source: Tiger Trade app

The Bullish Harami is a technical pattern that appears on price charts of stocks or other financial markets as a larger bearish candlestick (downward candle) surrounded or "pregnant" with a smaller bullish candlestick (upward candle).

The Bullish Harami suggests that a downtrend may be coming to an end, and there might be a chance for a reversal and upward movement in prices.

The technical characteristics of the Bullish Harami are as follows:

1. Downtrend: The Bullish Harami often appears after a downtrend, indicating that the downtrend may be approaching its end.

2. First Candlestick: The first candle is a longer bearish candle, representing selling pressure.

3. Second Candlestick: The second candle is a shorter bullish candle that is located within the body of the first candle, forming a pregnant shape.

4. Price Contraction: The body of the second candle is fully contained within the body of the first candle, forming a contracting shape.

5. Reversal Signal: The appearance of the Bullish Harami is considered a signal of price reversal, suggesting that the downtrend may transition into an uptrend.

The Bullish Harami is seen as a potential buying signal in technical analysis. However, to increase the accuracy of trading decisions, it is recommended to combine it with other technical indicators and trend confirmations for comprehensive analysis.

Here's an example to help you better understand the Bullish Harami:

Apple Inc. (AAPL) - A clear Bullish Harami pattern appeared in August 2019. When this pattern emerged, it indicated strengthening bullish forces in the market, and subsequently, the stock price of Apple Inc. started to rise.

Source：Tiger Trade app

Please note that the above example does not constitute investment advice for the future. When making any investment decisions, carefully analyze the current situation of the stock and consider other technical and fundamental factors for comprehensive evaluation.

In the Bullish Harami pattern, you should also pay attention to the following aspects:

1. Confirm the pattern: Ensure that the first candle is a larger bearish candle, and the second candle is a smaller bullish candle fully surrounded or pregnant within the first candle.

2. Background condition: Observe the context in which the Bullish Harami appears, i.e., whether it emerges after a clear downtrend to enhance its reliability.

3. Volume: Pay attention to the trading volume when the Bullish Harami forms. Higher trading volume can provide stronger confirmation signals.

4. Trend confirmation: Combine other technical indicators and trend confirmation tools, such as moving averages, Relative Strength Index (RSI), etc., to confirm the validity of the Bullish Harami.

5. Confirmation of breakout: Observe if the price can break above the high point of the Bullish Harami pattern, as it could be a signal for further uptrend.

6. Target price: Based on the height of the Bullish Harami and the breakout point's location, you can estimate the target level for future prices.