Harami Cross

  • Post author:
  • Post last modified:January 11, 2024
  • Reading time:2 mins read
  • Post category:Content

The Harami Cross is a candlestick pattern that is used in technical analysis to identify potential trend reversals in financial markets. It is considered a reversal pattern and is formed by two candlesticks.

Here are the key characteristics of the Harami Cross pattern:

1. **Formation:**
– The Harami Cross pattern is formed by two candlesticks, where the first candlestick is larger and represents the existing trend. The second candlestick is smaller and has a much smaller real body, forming a cross or a plus sign.

2. **First Candlestick:**
– The first candlestick in a Harami Cross pattern is typically a large and long candlestick that reflects the current trend. For example, in a downtrend, the first candle would be a long bearish (downward) candle.

3. **Second Candlestick:**
– The second candlestick is a small-bodied candlestick that is completely engulfed by the real body of the first candlestick. It has an open and close that are within the high and low range of the first candlestick.

4. **Cross Formation:**
– The small real body of the second candlestick, contained within the high and low of the first candlestick, creates a cross-like appearance on the chart, hence the name “Harami Cross.”

5. **Significance:**
– The Harami Cross pattern is considered a potential reversal signal. It suggests that the previous trend may be losing momentum, and a reversal could be imminent. Traders look for confirmation signals to validate the potential reversal.

6. **Bullish and Bearish Versions:**
– There are bullish and bearish versions of the Harami Cross pattern. In a downtrend, a bullish Harami Cross may indicate a potential reversal to the upside, while in an uptrend, a bearish Harami Cross may signal a potential reversal to the downside.

7. **Volume Consideration:**
– Traders often consider trading volume in conjunction with the Harami Cross pattern. An increase in volume on the day of the small-bodied candlestick can add more weight to the potential reversal signal.

8. **Confirmation:**
– While the Harami Cross pattern can be a signal of a potential reversal, traders often look for additional confirmation from other technical indicators or chart patterns before making trading decisions.

It’s important to note that no single candlestick pattern guarantees a reversal, and traders should use the Harami Cross pattern in conjunction with other analysis tools for a more comprehensive assessment of market conditions. Additionally, market context and overall trend considerations play a crucial role in the interpretation of candlestick patterns.