Bulkowski’s Bullish Harami

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 bullish harami functions much like the bearish one: about randomly. It is supposed to be a bullish reversal in theory, and testing shows that it actually works that way, too, but only 53% of the time. With a frequency rank of 25, you can find it as often as canned goods in a grocery store. The overall performance rank is 38th, where 1 is best out of 103 candles, so it shows mediocre performance after the breakout.

Important Results

Theoretical performance: Bullish reversal Tested performance: Bullish reversal 53% of the time Frequency rank: 25 Overall performance rank: 38 Best percentage meeting price target: 69% (bull market, up breakout) Best average move in 10 days: 4.05% (bear market, up breakout) Best 10-day performance rank: 45 (bear market, up 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.

Bullish Harami

Discussion

The bullish harami candlestick functions almost randomly with reversals taking a slight edge over continuations by 53% to 47%. That means you probably can’t guess the breakout direction with any accuracy. The frequency rank is 25, which means the candle pattern should be plentiful in a historical price series. The overall performance rank of 38 is decent but not outstanding.

The best average move 10 days after the breakout is a rise of 4.05% in a bear market. I consider moves of 6% or higher to be good. The move also gives a 10-day performance rank of 45, which is mid list between 1 (best) and 103 (worst).

Identification Guidelines

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.

1. Bullish harami candles that appear within a third of the yearly low perform best -- page 385.
2. Select tall candles -- page 386.
3. Trade bullish harami as part of a downward reversal in an up trend -- page 387-388.

Example

This bullish harami, circled in red, appears as a reversal in a short term downtrend. What strikes me first about this picture is the wonderful looking triple top chart pattern. The three peaks (1, 2, and 3) beginning in February near the same price are bearish and price drops after the pattern completes, as predicted by the pattern.

The bullish harami does’t have much to reverse, does it? The tall black candle speaks of a continued downward price trend but the next day, a white candle appears. The body of the white candle is inside the body of the black candle.

In this example, the bullish harami functions as a bullish reversal of the downtrend when price breaks out upward. However, overhead resistance setup by the prior two peaks stop the upward trust and price collapses again.

-- Thomas Bulkowski