Technical Analysis -- Episode 18: Bearish harami
The Bearish Harami is a technical pattern that typically appears on price charts of stocks or other financial markets. It consists of a larger bullish candlestick (upward candle) followed by a smaller bearish candlestick (downward candle) whose body is completely contained within the body of the first candle.
The Bearish Harami suggests that an uptrend may be coming to an end and a downtrend might be on the horizon.
The technical characteristics of the Bearish Harami are as follows:
Uptrend: The Bearish Harami often appears after an uptrend, indicating that the upward trend may be ending.
First Bullish Candle: The first candle is a larger body, representing bullish strength.
Second Bearish Candle: The second candle is a smaller body that is completely contained within the body of the first candle.
Price Contraction: The body of the second candle is fully enclosed within the body of the first candle, forming a contracting shape.
Reversal Signal: The appearance of the Bearish Harami is considered a signal of price reversal, suggesting that the uptrend may be ending and a downtrend could be approaching.
Here's an example to help you better understand the Bearish Harami:
Tesla (TSLA) - A Bearish Harami technical pattern appeared in December 2014. When this pattern emerged, it indicated strengthening bearish forces in the market, and subsequently, Tesla's trend started to decline.
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 Bearish Harami pattern, you should also pay attention to the following aspects:
Confirm the pattern: Ensure that the first candle is a larger body and the second candle is a smaller body fully contained within the first candle's body.
Background condition: Observe the context in which the Bearish Harami appears, i.e., whether it emerges after a clear uptrend to enhance its reliability.
Volume: Pay attention to the trading volume when the Bearish Harami forms. Higher trading volume can provide stronger confirmation signals.
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 Bearish Harami.
Confirmation of breakout: Observe if the price can break below the low point of the Bearish Harami pattern, as it could be a signal for further downtrend.
Target price: Based on the height of the Bearish Harami and the breakout point's location, you can estimate the target level for future prices.
Please note that technical patterns are just one of the tools for analyzing stock trends and should not be the sole basis for investment decisions. You should combine other technical indicators, fundamental factors, and overall market conditions for comprehensive analysis and adopt appropriate risk management strategies to make wiser investment decisions.
Additionally, be prepared to adjust your investment strategy in response to market changes.
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8 November 2023 — 15 November 2023
In the next issue, we'll introduce another useful technical pattern, Bullish harami, which will make your stock trading easier and simpler after you learn it!
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