Bulkowski’s Bearish Harami Cross

Written and copyright © 2008-2009 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 cross is a modification of the bearish harami candlestick pattern. There are a few differences in treatment of the second day. The bearish harami cross shows a doji candlestick on the second day whose trading range fits inside the prior day, whereas the bearish harami sports a black candle with shadows that can poke outside the prior candle’s body. A doji signals indifference whereas a black candle means "bearish." Yet the bearish harami cross is supposed to act as a bearish reversal. In fact, testing shows that this candle pattern is actually a bullish continuation 57% of the time. That is better than the 53% continuation rate of the bearish harami. In other words, the bearish harami cross works better, but not in the direction that traders expect.

Important Results

Theoretical performance: Bearish reversal Tested performance: Bullish continuation 57% of the time Frequency rank: 45 Overall performance rank: 80 Best percentage meeting price target: 69% (bull market, up breakout) Best average move in 10 days: -3.13% (bear market, down breakout) Best 10-day performance rank: 41 (bull 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 Cross

Discussion

The bearish harami cross is supposed to be a bearish reversal candle, but it actually acts as a bullish continuation of the existing up trend 57% of the time. I still consider that "near random," so do not get too excited. What is worse is the overall performance rank of 80. That is downright awful. The worst performance a candle pattern can rank is 103 where 1 is the best rank. It suggests that the price trend after the breakout does not last long, and that is supported by the statistics, too.

The best average move over 10 days after the breakout highlights the poor performance. Price drops 3.13% in a bear market. A decent move would be a drop of 6% or more. The best 10-day performance rank is 41 and that occurs after a downward breakout in a bull market. That also seems to continue a trend, that of the best performance coming from moves against the market: upward breakouts in a bear market or downward ones in a bull market. The only explanation I can offer for this is that it occurs because of a snapback rally or drop. The market is either overbought or oversold and traders jump in as a mass and push price in the opposite direction. Of course, no one really knows the answer, including me.

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. Bearish harami cross candles that appear within a third of the yearly low perform best -- page 394.
2. Select tall candles -- page 395.
3. The best performance from a reversal comes after an upward retracement of the downward price trend -- page 396-397.

Example

The chart shows a bearish harami cross circled in red on the daily chart. Price trends upward leading to the two line pattern then a tall white candle appears. Following that, a doji shows. A doji is a candlestick that has opening and closing prices within pennies of each other. The doji, including its shadows, fits inside the high-low range of the white candle. Those versed in chart patterns will recognize this as an inside day.

In this example, price breaks out upward the day after the doji, continuing the upward trend. That happens 57% of the time in a bull market. Notice that the trend does not last that long -- three days before price peaks (in a few more doji) and reverses.

-- Thomas Bulkowski