Definition and identification
The candlestick formation Bullish Harami Cross is a trend reversal pattern that occurs in bearish markets, and indicates that there is a probability that a change from bearish to bullish trend will occurs. This pattern has a moderate reliability and can be identified as follows:
- First a long candle is produced, which can be white or black.
- A Doji is then formed in the next period, which is within the range of the previous candlestick.
- The previous trend must be necessarily bearish.
Interpretation of the Bullish Harami Cross Pattern
This is a known uptrend reversal pattern, which is even more reliable than a traditional Bullish Harami.
The Bullish Harami Cross is the opposite pattern to the Engulfing Bullish formation. While in the Engulfing Bullish a small body candlestick is wrapped by a larger candle in the Bullish Harami Cross a Doji appears after a long candlestick.
In this case, the pattern indicates indecision in the trend due precisely to the Doji. The Japanese have their own way of naming this formation and is the following: “Enter a crack at the market.”
The Bullish Harami Cross is more reliable and therefore more effective if the previous big candlestick is white, because as in the more traditional Haramis, white candles by themselves are very bullish.
Such Haramis usually has much more effect compared to traditional Haramis.
In case that in the next period after this pattern occurs, the price ends below the Doji closing, it is likely that the signal of the pattern is not valid and therefore it will not produce a change in the downtrend and prices will continue their downward trajectory.
In the Bullish Harami Cross pattern, the first candlestick may be short. This causes the change of the confirmation level to be made with respect to the length of the body of the first candle:
- If the first candlestick body is short, then the confirmation level will be defined as the upper end of the body of the first candle.
- If the first candlestick body is long, then the level confirmation will be the closing price of the second period or the midpoint of the first candlestick, whichever is higher.
For confirmation of the pattern, prices must exceed this level.
Bullish Harami Cross Pattern example
You can find more information about the most popular candlestick formations in the following guide: Japanese candlestick patterns