Patterns/ Two candles

Two candles 6 min read

Bullish harami

A long down candle, then a small candle that sits entirely inside it. Not a reversal so much as a sudden stop — the selling pressure simply switched off, and the pattern records the quiet rather than the turn.

What the shape is

Two candles. The first is a long down candle. The second has a small body that sits entirely within the range of the first candle's body. The word is Japanese for "pregnant", which describes the picture well enough — a large candle carrying a small one.

The strict version asks for the second candle's whole range to be inside the first's body. The common version only asks for the bodies. Either way, the content is the same and it is modest: after a period of heavy selling, the next period did almost nothing.

That is a different claim from the one an engulfing candle makes. An engulfing says buyers took control. A harami says sellers stopped — which is a necessary step toward a turn, and nothing like a sufficient one.

When it means something

Selling that switched offIllustrative
A long down candle, then a session that barely moved and stayed entirely inside it. The contrast in size is the signal. Whatever was forcing price down was no longer there the next period, and the candles afterwards work higher.

The useful reading is about participation rather than direction. One period of heavy, one-way selling followed by a period of near-nothing says the pressure was finite and has been exhausted. It does not say anyone wants to buy.

The same shape, meaning nothing

A pause, and then more of the sameIllustrative
Same two candles, same proportions, and the decline resumed immediately afterwards. Markets that fall hard routinely pause for a session before continuing. A quiet day is a quiet day.

A harami says the selling stopped. It does not say the buying started.

Telling them apart

  • How big is the size contrast? A small candle inside a huge one is a real change of pace. A medium candle inside a slightly larger one is nothing.
  • Did volume drop as well? A quiet candle on a quiet volume bar is consistent. A quiet candle on heavy volume means a lot of trade happened with no net result, which is a different and more interesting thing.
  • What happened next? A harami is explicitly a pause. The period after it is what decides which way the pause resolves, and until that arrives there is nothing to read.
  • Did the low hold? The first candle's low is the obvious failure point.
The honest summary

The mildest of the two-candle patterns, and the one most often oversold. It describes an absence — selling that stopped — not a presence. Read as 'the pressure is off, let us see what happens next' it is useful. Read as a reversal it is close to meaningless, because most pauses in a decline are just pauses.

Terms used

Harami
A small candle whose body sits entirely inside the previous candle's body.
Bearish harami
The same structure after an advance, following a long up candle.
Inside bar
A candle whose entire range is contained within the previous candle's range.
Participation
How much trading actually took place, usually read from volume.

Patterns are the easy half

Reading the chart underneath them is the part that decides whether any of this is useful. The Charts track works through levels, volume, trend and timeframes from the beginning.

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