The Harami pattern is almost the opposite of the Engulfing pattern, except that the candlesticks in the Harami can be the same color, and is quite similar to the inside day pattern in OHLC charts. Like the Engulfing pattern, the Harami pattern consists of two candlesticks with the first candlestick being a large candlestick and the second being a relatively small candlestick. The name is derived from the Japanese word for pregnant, with the first candlestick seen as the "mother" with a large real body that completely enclosing or embodies the smaller second candlestick, creating the appearance of a pregnant mother. The second candlestick may appear to be a Spinning Top or a Doji. When the second candlestick is a Doji, the pattern is called a Harami Cross.
The color of the second candlestick is not important. More often than not the second candlestick will be the opposite color of the first candlestick. However, the location of the Harami within an existing trend and the direction of that trend is important. The Harami is a trend reversal patternand must therefore appear in an existing trend but it should be seen in the context of the chart. Thus, if the Harami appears at or near a support and resistance line, or a trend line, it becomes more significant. When the Harami appears in an uptrend it is a bearish signal when it appears in a down trend it is a bullish signal. The appearance of the Harami, and the short real body of the second candlestick, is a signal that indecision and uncertainty following a sudden surge in movement of the trend is causing the trend to lose momentum. In an uptrend, it means that buyers have failed to follow up on the surge of activity and close the second candlestick at or near the high of the previous candlestick. And in a down trend, it means that sellers have failed to close the second candlestick near the low of the previous candlestick. In both cases this weakness indicates that a trend reversal may be imminent.
The Harami Cross
The Harami Cross pattern is more significant as it contains a Doji, which is a candlestick with no or very little real body. As mentioned elsewhere, a Doji is formed when the open price and the close price of the candlestick are the same or are very close together. They tend to indicate indecision and uncertainty in the market. Also, a Doji with long the shadows has the greater the significance than a Doji with short shadows.