ASX Charting Course

Chapter 48 Candlesticks

Formations V

Harami

Harami means pregnant in Japanese and refers to the shape of the formation, which is a two candle formation. Harami occurs when the real body of the second candle is completely engulfed by real body of the first candle. The direction or colour of the second candle is not important, but the size of the real body of both candles is indicative to the strength of the signal. The first candle should have a rather large real body. The smaller the real body in the second candle the stronger the signal. The second real body is usually a different colour to the first candle, but doesn’t have to be.

Even though it’s not a requirement it is preferable for the shadows of the second candle to be engulfed, if not by the real body of the first candle at least engulfed by the previous range, high to low.

The signal issued by a Harami is a change in trend.

Harami Bearish

Fig 80

The final two candles expose the Harami bearish formation. It’s bearish because it occurs at the end of an uptrend. This formation happens only after a clear up trend.

Harami Bullish

Fig 81

The Harami cross in the above diagram occurs at the end of a down trend. The Doji occurs after a long body down candle and therefore issues a strong bullish signal.

Piercing line

This formation occurs at the end of a downtrend. It can also occur at the bottom of a congestion band. It is the inverse of a dark cloud formation and signals change. That could be a change in trend or short term direction in the case of a congestion phase.

The first real body of the formation is a strong down candle. The body of the next candle has its low below the low of the first and the top of the real body is at least half way up through the real body of the first candle.

Fig 82

The last two bars comprise the piercing line formation. The close of the second is above the half way mark of the real body of the first candle.

Craig MacLean is a Futures Adviser Licensed under the Australian Securities Commission, Corporations Law. The writer accepts no responsibility for any losses incurred from any action or inaction derived from the advice in this report.



ASX Charting Course
Chapter 48 Candlesticks Formations V
Harami Harami means pregnant in Japanese and refers to the shape of the formation, which is a two candle formation. Harami occurs when the real body of the second candle is completely engulfed by real body of the first candle. The direction or colour of the second candle is not important, but the size of the real body of both candles is indicative to the strength of the signal. The first candle should have a rather large real body. The smaller the real body in the second candle the stronger the signal. The second real body is usually a different colour to the first candle, but doesn’t have to be. Even though it’s not a requirement it is preferable for the shadows of the second candle to be engulfed, if not by the real body of the first candle at least engulfed by the previous range, high to low. The signal issued by a Harami is a change in trend.
Harami Bearish
Fig 80
The final two candles expose the Harami bearish formation. It’s bearish because it occurs at the end of an uptrend. This formation happens only after a clear up trend. Harami Bullish
Fig 81
The Harami cross in the above diagram occurs at the end of a down trend. The Doji occurs after a long body down candle and therefore issues a strong bullish signal. Piercing line This formation occurs at the end of a downtrend. It can also occur at the bottom of a congestion band. It is the inverse of a dark cloud formation and signals change. That could be a change in trend or short term direction in the case of a congestion phase. The first real body of the formation is a strong down candle. The body of the next candle has its low below the low of the first and the top of the real body is at least half way up through the real body of the first candle.
Fig 82
The last two bars comprise the piercing line formation. The close of the second is above the half way mark of the real body of the first candle.
Craig MacLean is a Futures Adviser Licensed under the Australian Securities Commission, Corporations Law. The writer accepts no responsibility for any losses incurred from any action or inaction derived from the advice in this report.