Since candlesticks are the basic building block of most technical analysis, the ability to recognize different candlestick patterns is a crucial trading skill.
First though, let’s start with a definition.
What Is a Bearish Harami Cross Pattern?
A bearish harami cross pattern is a 2-candlestick formation that may signal a bearish reversal. It may appear during an uptrend and is made up of a large bullish candle followed by an inside doji candlestick. The trading range of the second candle must be completely contained within that of the first.
It is a subtype of the harami cross pattern and the opposite of the bullish harami cross. It is also closely related to the bearish harami.
Of course, no candlestick pattern guarantees a particular outcome. Instead, they offer clues as to what is going on in the market.
So the question is, what does a harami cross really tell you?
What Bearish Harami Cross Patterns Mean
Like many candlestick patterns, the name itself doesn’t reveal much.
In Japanese, harami means “pregnant,” assumedly based on the way the pattern looks. The long candle represents the mother, the short candle represents her pregnant belly—and is designated by the “cross.”
In trading terms:
- During the first period, price continued the pre-existing uptrend.
- Before the second period opened, price moved lower, opening within the range of the prior candle body.
- During the second period, price stayed within the range of the prior candle body and closed at (or very near to) the open.
This sets the stage for bearish reversal, as selling pressure appears to be mounting.
How To Recognize Bearish Harami Cross Candlestick Patterns
Traders are attracted to patterns partly because they are easy to spot.
However, it’s also easy to see things on the charts that aren’t truly there (or anticipate events that never come to fruition). That’s one of the reasons why waiting for confirmation is so important.
Technically, a bearish harami cross pattern must:
- Appear during an uptrend
- Begin with a bullish
- End with a doji candlestick
- Have the second candle’s body and wicks contained completely within the body of the first
In practicality though, many traders will make various exceptions.
- The first candle doesn’t have to be a long candle, as long as it contains the second candle and moves in the direction of trend.
- The second candle’s wicks don’t have to be contained within the body of the first, as long as the open and close are.
- The open and close of the second candle can be even with the close of the first candle, especially in markets where inside candles are less common like cryptocurrency.
- If additional, consecutive doji after the second candle remain contained within the body of the first candle, all would be included in the harami cross pattern.
Depending on who you ask, any of these standards may be more or less important. Moreover, some of these variations may be more properly classified as other reversal candlestick patterns, such as the bearish harami.
Remember, identifying the reversal itself is more important than labeling the formation. That’s not to say these standards are completely unimportant (as we’ll touch on shortly). It’s just to say that the implications are more important than the criteria.
In other words, you need to put it into context.
Where Bearish Harami Crosses Fit in the Chart Narrative
The markets are often characterized as a battle between the bulls and the bears.
Bearish harami cross patterns show that the bulls attempted to press their advantage on candle one, lost momentum between candles, and fully stalled out by the close of candle two.
On the chart, it looks like the birth of a downtrend.
It might happen like this on a daily time frame:
On the first day, the bulls continued the uptrend with a powerful move higher. Once the market closed though, price slowly began to decrease. As the second day opened inside the open and close of the previous day, uncertainty spiked. This led to a flurry of activity as traders braced for various possibilities. Ultimately, price whipped up and down before finally settling back at the open.
From here, the bulls consider taking profits as the bears begin to grow more ambitious.
In the short-term, it amounts to a bear trend incubator.
The question traders need to ask themselves is, “Will this birth a sustained reversal or a miscarriage of momentum?”
To answer that question, you’ll need more than just an understanding of Japanese candlesticks and candlestick patterns. You’ll want to analyze both within the context of greater chart patterns as well as trend and price levels. You’ll also want to make use of your own chart markup and indicators.
Analyze the history of your preferred asset(s) with respect to harami cross patterns and apply it to your own trading style.
Now, you can test (and/or stretch) the criteria we mentioned above to find the most tradeable opportunities. For example, you may find that bearish harami crosses that feature a gravestone doji second candle perform more reliably. Or, you may find something else entirely.
Here is where the story in the charts begins to come into focus.
This is what we call technical analysis.
How To Trade Bearish Harami Cross Patterns
Bearish reversal points are great places to exit longs or enter shorts.
Bearish harami cross patterns serve as easy-to-spot signs of potential reversals—and may even lead to longer-term tops when found on higher time frames.
Generally, you can put more weight into multi-stick patterns than single candles. They give you more information over a longer amount of time. Still, it is considered unwise to trade based on candlestick patterns alone. They rarely have extremely high hit rates by themselves.
You need additional points of confluence to shift the probabilities in your favor.
Some of the more important ones include:
- Volume – Reversals are often accompanied by elevated trading volume. For bearish harami crosses, be on the lookout for it on the second candlestick (or shortly thereafter).
- Price Formations – Bearish harami crosses that form near important resistance levels are usually more likely to lead to sustained reversals. They may also reinforce the strength of such levels.
- Oscillator Shift – Oscillating indicators like the RSI or stochastics are commonly used to identify reversals by analyzing slope, percentile, and/or divergence.
The fewer such factors corroborating the reversal, the less confident you can be about it.
It would be difficult to form a comprehensive trading strategy around harami cross patterns (whether bullish or bearish). There simply isn’t enough there to develop a strong edge. Even with a great understanding of trading math, orders, psychology, risk management, options, and automation, you’d still have a hard time.
You’re much better off building your strategy around other tools then using reversal patterns as an additional point of confirmation.
Patterns like the harami cross are much better idea givers than trade makers.
Other Candlestick Pattern Types
The bearish harami cross is but one of many candlestick patterns.
You’d be wise to get familiar with all of the other ones too.
- Abandoned Baby – Bearish/Bullish
- Counterattack Line – Bearish/Bullish
- Doji Star – Evening/Morning
- Engulfing – Bearish/Bullish
- Harami – Bearish/Bullish
- In Neck – Bearish/Bullish
- Mat Hold – Bearish/Bullish
- On Neck – Bearish/Bullish
- Star – Evening/Morning
- Tasuki Gap – Downside/Upside
- Three Inside – Down/Up
- Three Methods – Falling/Rising
- Three Outside – Down/Up
- Tweezer – Top/Bottom
- Window – Falling/Rising
Sure, there are quite a few of them. But don’t let that intimidate you.
It’s unnecessary to memorize all the names and criteria for every pattern. What’s more important is to learn the principles of price action and technical analysis.
In fact, you’re free to forget all of the names and specifications as long as you can look at a group of candlesticks and understand what they are trying to tell you.
Takeaways
To review:
Bearish harami crosses are a type of candlestick pattern that signals a potential bearish reversal. While not a guarantee, their appearance may indicate that market conditions are changing. Thus, they can help you find winning trades.
Of course, there are other candlestick patterns that you should learn about. And even so, the ability to recognize patterns is not enough to trade successfully on its own.
Nonetheless, you’ve now added one more tool to your toolkit.
Have questions or more information to add? Contribute to the conversation in the comments below! Or, if you know someone who could benefit from this post, share it with them. You can also check out our Candlestick Patterns Guide to improve your candlestick analysis skills.