|
Written and copyright © 2008-2010 by Thomas N. Bulkowski. All rights reserved.
In my book,
Encyclopedia of Candlestick Charts  , pictured on the right,
I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines
in the tests.
The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines,
performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators),
and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy
by clicking on the above link.
The bearish harami is supposed to act as a bearish reversal, but testing shows that it is a bullish continuation pattern 53% of the time. That is what I call "near random." An upward
price trend leading to the start of the bearish harami helps price close above the top of the candle pattern and score an upward breakout -- continuing the uptrend. Once price breaks out, the
trend is not an exciting one. Looking at the various combinations of bull/bear and up/down markets, the price change over 10 days is less than half the 6% I consider good. That is why
overall performance ranks 72nd (where 1 is the best performance out of 103 candlestick types).
Important Results
|
Theoretical performance: Bearish reversal
Tested performance: Bullish continuation 53% of the time
Frequency rank: 26
Overall performance rank: 72
Best percentage meeting price target: 64% (bull market, down breakout)
Best average move in 10 days: -4.01% (bear market, down breakout)
Best 10-day performance rank: 50 (bear market, down breakout)
All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.
|
 Bearish Harami
|
Discussion
As I mentioned in the introduction, the bearish harami functions randomly, so do not depend on it acting as a reversal of the primary trend. In fact, it acts as a continuation pattern
more often than a reversal. The overall performance rank of 72 suggests that the trend after the breakout is a weak one. A check of the statistics confirms this. In fact, the best
performance 10 days after the breakout is a drop of 4.01% in a bear market. A good move would be 6% or more, so this falls short. The drop ranks 50th out of 103 candle patterns, or about mid
range.
The frequency rank is 26 and that means you will be able to find plenty of bearish harami’s in a historical price series. Whether or not it is worth the hunt I will leave up to you.
Identification Guidelines
| Characteristic | Discussion |
| Number of candle lines | Two. |
| Price trend leading to the pattern | Upward. |
| Configuration | Look for a tall white candle followed by a small black one. The opening and closing prices must be within the body of the white candle. Ignore the
shadows. Either the tops of the bodies or the bottoms (or both) must be a different price. |
Three Trading Tidbits
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book
where the tips appear.
- If the bearish harami appears near the top of a trend channel, then a downward breakout is more likely -- page 379.
- Select tall candles -- page 377-378.
- Volume gives performance clues -- page 378-379.
Example
The chart shows a bearish harami, circled in red, on the daily scale. This one appears in an upward price trend, as required. The first candle
is a tall white one followed by a black candle with a smaller body. The body fits within the body of the white candle.
The breakout from this candlestick pattern is upward. A breakout,
by the way, is a close either above the top of the candlestick pattern or below the bottom of it. In this example, price closes above the top of the candle first, so the breakout is upward.
This bearish harami candle acts as a continuation of the upward price trend, but notice that the trend soon ends. Also notice that the primary trend is downward. Although this bearish harami happened
to breakout upward shortly before a downturn, the setup is correct. In other words, for the best results as a reversal candle, look for the bearish harami to appear at the top of an upward
retrace in a downward price trend. When price breaks out downward, it rejoins the existing primary trend and price tends to drop.
-- Thomas Bulkowski
|
. If you buy ANYTHING, they pay for the referral.
on 
