Share Market Knowledge: Learn to spot bullish candles, you’ll catch shares before they run away.

How to choose the right stock: Candlestick patterns are very useful in understanding the movement of any stock. Most technical analysts invest based on these patterns. One such candlestick pattern is – Harami. This pattern formed by connecting two candles can be bearish as well as bullish. The name of this candlestick pattern may sound like an insult, but it is not. It has a meaning in itself.

Let us first understand the meaning of the Harami candlestick pattern. The trading system in Japan is the oldest system in the world. The whole art of candle stick has reached the world from Japan. One such pattern is the Harami candlestick pattern. Harami is the Japanese word for a pregnant woman. So to understand this style you must first understand what a pregnant woman looks like – a woman standing upright with a baby in her belly. The child appears to be separate and raised from the whole body of the woman. This pattern looks exactly the same. In this pattern, the first candle is a long candle and the second candle is formed after it is short. When the two candles meet, it forms a Harami pattern.

The chart of ‘Tata Consumer Products’ is visible in this image. After a long decline, a ‘Belish Harami pattern’ has formed below. After that, Bha did not look back.

Where will the part go? This will tell the pattern
To understand Harami patterns, you need to know basic candlesticks. If you know the basics, you need to find Harami candlestick patterns. The movement of the stock will depend on where the Harami pattern forms. If such a pattern forms at the top of the stock, it may be a bearish sign. Conversely, if it forms below the chart, the share may move upwards from there.

How to Identify True Bullish Patterns

• A large red candle is formed after a long decline. This will be called the first candle of the pattern.
• The second candle should be green in color and should be exactly in the middle of the previous red candle. Nothing can be more than that.
• The size of the second candle (green) should be smaller than the first candle. It should look like a woman has a baby in her belly.
• The high and low of the second candle should be within the price (high and low) of the first candle (red).
• The candlestick (shadow) of the second candle should also not be outside the price range of the first candle.
• The first candle will be large but the second candle can also be a doji candle.
• The image above shows the high and low of the candlestick.

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Where will this pattern become invalid?
Not that this pattern will work anywhere. If a pattern forms after a long rally, there is a good chance it will work. Likewise, if this pattern forms after a long decline in the stock, the stock may reverse or stop falling. After the decline stops, the stock may begin an uptrend. Between the two, it will be false if the pattern forms anywhere in the middle of the chart.

For example, if it forms without a decline in the chart or without a rally, it should not be considered valid. According to Investopedia, Bullish Harami patterns form after a bearish trend or decline. Where this pattern is seen, there is likely to be some price increase.

An example of a bearish Harami candle is in Engineering India stocks. After marking the pattern in yellow, the fraction had dropped significantly.

According to Investopedia, this can work if the pattern forms near support or resistance. If you don’t know about support and resistance, you should know the basics.

What is Harami style psychology?
After a long downtrend, suppose the previous day’s candle closes at Rs.100. Before that, the price was falling continuously. The next day, while the price should have opened at Rs 100 or below (because the bearishness continues), it doesn’t and the price opens above yesterday’s close. Suppose Rs.101. Since this stock is in the grip of the bears, the bears will try their best to bring it down, but by the end of the day, the price does not go below yesterday’s low, instead it closes at 102 or 103. This scene shows that the bears are no longer strong or the bulls have absorbed all their strength. That is, whatever was sold was bought in full. If the bulls show more strength from here, the price may reverse.

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When should you invest?
One thing that you should especially note here is that you should not invest money just by looking at the Bullish Harami pattern. Technical analysts always think of investing money when the price closes above the height of the first candle of the pattern (the falling red big candle). Investing money is considered safe only if the price closes above the red candle. A lower stop loss is placed on this red candle.

If the chart of ‘Tata Consumer Products’ is zoomed in, a ‘Bullish Harami Pattern’ was formed at a prominent place. This pattern can be bought at the top of the red candle and will act as a stop loss at the bottom of the same candle.

Meaning, if the price starts to fall again and goes below the red candle, don’t follow the pattern, you should walk away with a small loss. Because the strength of the bulls coming here has been absorbed by the bears and the price may fall further.

(Disclaimer: This article is written for informational purposes only. If you want to invest in any share, consult a certified investment advisor first. News18 will not be responsible for your profit or loss. )

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