In today’s article we will discuss the harami candlestick pattern and what it signifies is occurring in the markets. When identifying this candlestick you will look for certain criteria. The criteria for this pattern will depend on whether you are looking to identify it as bullish or bearish in nature.
When candlestick trading, this bullish pattern is a two candle pattern that forms in a down trending market. The body of the first candle is the same color as the current trend and it should be a long black candle. The body of the second candle is white and it opens and closes within the body of the previous day’s candle. The location and size of the second candle will influence the magnitude of the reversal. When this candlestick reversal pattern appears it means that the bulls open the price higher than the previous day’s close. The short sellers take notice that the trend has been violated. Candlestick analysis tells investors that the strong day the following day convinces investors that the trend is in fact reversing.
The longer the black candle and the while candle are when identifying this bullish pattern, the more forceful the reversal. Also the higher the white candle closes up on the black candle on the candlestick charts, the more convinced investors are that the reversal has occurred.
The bearish harami is a two candle pattern that forms in an uptrend. When identifying this pattern on candlestick stock charts, you should see the body of the first candle is the same color as the current trend, and it should be a long white candle. The second candle’s body is black and it opens and closes within the body of the previous day’s candle. This candlestick pattern formation indicates that the bears are opening the price lower than the previous day’s close after a strong uptrend has been in effect. The bulls are concerned as the price continues to close lower therefore indicating that the trend has been violated. Investors are convinced of the reversal if there is a weak day after.
The lower the black candle closes down on the white candle, the more convinced investors are that the reversal has in fact occurred. Also, the longer the white candle and the black candle are, the more forceful the reversal.
Japanese candlestick charting is fairly simple compared to other technical analysis tools. The identification of price patterns on the Japanese candlestick charts is the first part and the ability to act wisely depending on the pattern you see if the second part of successful trading. Many traders use candlestick analysis in conjunction with other technical indicators such as the moving average. Continue to research the candlestick basics to see how candlestick patterns can contribute to your daily trading routine.
Market Direction: Why do some stocks move up in a down market? This may seem like a very simple question but it is one of high relevancy. The answer is very simple. When an individual stock price is moving positive during a bear market, there are influences that are occurring not related to the general market conditions. Although this is an obvious observation, there are many investors that do not have the first inkling of how to find and take advantage of those price moves. Candlestick analysis fine-tunes the scanning techniques for identifying which stocks are building up bullish pressure during a weak market.
Is it possible to find the stocks that have the huge price move potential? In some cases, a surprise announcement will suddenly gap a price up substantially. Those are situations that cannot be readily identified. However, the use of candlestick analysis incorporates price patterns that make a big price move extremely probable. Knowing what the individual candlestick signals reveal and adding that information to a price pattern dramatically improves the possibility of being in the right place at the right time. This is especially useful for the daytrader, as well as the swing trader, that wants to get into a powerful price move at the exact correct time.
Knowing what the price patterns represent allows for very easy if/then trade executions. As illustrated in our recommendation of SNCR, the candlestick signals and the use of moving averages produced an extremely high probability trade. After a strong Hammer signal, bouncing on the 50 day moving average, the following day took the trading back up to the 200 day moving average. This made for a very simple trade decision. If the price open higher the next day, a position should be bought immediately. The result of a candlestick reversal signal bouncing off a major moving average, the Hammer signal bouncing off the 50 day moving average, confirmed the next day indicated the continued strength revealed by the gap up in price a week before. However, that trade was not executed with the price opening lower the following day and forming a gravestone Doji.
This set up for a high probability trade the following day. One of the simple rules for a Doji is that prices will move in the direction of how they open the price following a Doji. Also, with stochastics still in an uptrend, it became a very simple trade execution if the price came up through the $10.25 level. This would have confirmed the continued uptrend revealed by the Hammer signal and it would have demonstrated the 200 day moving average was not acting as resistance anymore. The accumulation of all that information produces a high probability that the uptrend could move substantially after breaching that level.
The same analytical scenario was applied to our recommendation on BEAT this morning. A Kicker signal that brought the price right up to the 200 day moving average created an easy if/then trade execution. The Kicker signal occurred at the end of a visually recognized rounded bottom. The 20 day and 50 day moving average appeared to be acting as support. A Kicker signal gap-up through the tee line was a very strong buy signal. This made for a very simple entry strategy. If the price moved up above the 200 day moving average today, that would reveal that it was not going to act as resistance. Also, it would be taking prices above the last peak at the first of the year. The recommendation for entering this trade was very simple if the price moved above the 200 day moving average, it was time to buy aggressively, immediately.
Professional investors use all the information they can gather to put the probabilities in their favor. Candlestick analysis breaks down price movements into the simple and easy-to-understand observations. Full-time investors or investors that rely heavily upon their market trading income want to take advantage of every aspect of investment intelligence. The Candlestick Forum Boot Camp reveals in detail how to trade like a professional investor. Take advantage of the information being presented in this online boot camp. The difference between being a good investor and a highly successful investor is merely recognizing the details that most investors ignore. If you want to turn your investment results around, take the time to learn the small nuances that the professional investors already utilize. This is not difficult information to learn. Most people know what to do to be a successful trader. Putting that information into action is the biggest problem. Are you having problems with your investing results? Utilize the knowledge of somebody that has been trading for 30 years. Recognizing a few small details of your trading habits could completely alter your investment returns. The reason the boot camp is limited to only 15 people is so that everybody has an opportunity to have their results scrutinized. Corrective measures on an individual basis will make an investors outlook much more progressive. Click here for details on the Candlestick Forum boot camp
Chat session tonight at 8 PM ET, open to everybody. We will investigate the powerful bullish price patterns that work effectively even in bear markets. Click here for instructions.
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