Harami

The Harami position goes for two days and has two distinct features:

1. The second stick is completely contained within the body of the first stick.
2. The second stick is also in the opposite color.

The first stick might show a stock rising in value while going from 25 to 35. The second would then have the stock falling while the value runs from 28 to 32. Also, the volume shadows might be smaller in size. The Harami position is a sign that a stock is trending in a certain path, but that path might not be that strong. You can trade the Harami by looking at how the stock moves in the opposite direction following the first stick. Watch for how the few sticks that came before the first one being played out too as that might show you a trend that is about to be reversed.

You can enter into a position after that second stick is introduced. As you do this, you should also place a stop order in the opposite direction of where you feel the stock will move. Although the Harami typically shows when something is going to move in the opposite direction, it could still be a small bump in the road.

You may also find a Harami cross when looking at the pattern. This is a Harami where the second candle is the doji. The Harami cross will operate in the same fashion as a regular Harami. In fact, it might be a sign that the reversal in its value will be even greater than what it was like at the start.