Harami Reversal Pattern

'Harami' is an old Japanese word for pregnant. The Japanese nickname for the long candle is the 'mother' candle and the small candle is the 'baby'.

The harami candlestick is made up of two candlesticks, and it can be either bearish or bullish, depending on the preceding trend. The first candlestick has a long body and the second candlestick has a small body that is totally encompassed by the first.

There are four possible combinations: white/white, white/black, black/white and black/black.

No matter what the colour of the first candlestick, the smaller the body of the second candlestick, the more likely the reversal. If the small candlestick is a doji, the chances of a reversal increase.

Practical Example: Leighton Holdings (LEI) September 2011.
Note the sharp countertrend up to the predominant downtrend that ended with the "Harami". This end to the counter trend was supported by the Macd hitting its peak and pulling back in conjunction with the fast-moving stochastic line pulling back from the overbought and slipping back under the slower-moving stochastic.