Harami: The Contained Candle That Signals a Pause
A Harami forms when a small candle is completely contained within the body of the prior larger candle. The word means 'pregnant' in Japanese — the large candle is the mother, the small one the child. It signals a sudden loss of momentum and a potential trend reversal.
The Harami pattern captures a shift in energy. The first candle is large and decisive — a strong move in the direction of the trend. The second candle is small and contained, opening and closing entirely within the first candle's body. After a powerful session, the market barely moved. That dramatic deceleration is what gives the Harami its signal: the force that drove the trend has suddenly evaporated.
Bullish Harami (left): small green candle inside a large bearish candle — momentum stalled. Bearish Harami (right): small red candle inside a large bullish candle.
Why a Small Candle Inside a Big One Is Significant
Think about what it means for a session to produce a tiny range inside a prior large range. The trend had been moving powerfully. Now, suddenly, neither bulls nor bears could make headway. That collapse in range reflects a collapse in conviction. The dominant force has used up its energy — at least temporarily.
Harami vs Inside Bar: What's the Difference?
| Feature | Harami | Inside Bar |
|---|---|---|
| What's compared | Real bodies only — the second body fits inside the first body | Full candle range — the second high/low fits inside the first high/low |
| Wicks | Wicks of the second candle can extend beyond the first | Wicks must also be contained |
| Signal type | Reversal pattern | Breakout/compression pattern |
| Context | After an extended trend move | Can appear anywhere — often in consolidation |
The Harami Cross: Stronger Version
When the second candle in a Harami is a Doji — an open and close at nearly the same price — the pattern is called a Harami Cross. The Doji amplifies the indecision signal already present in a regular Harami. If the first candle was a very large momentum candle, and the Doji is tiny and centred inside it, this is one of the clearest 'trend exhaustion' signals in candlestick analysis.
Bearish Harami at Resistance
After a 7-day rally, a stock forms a strong green candle at known resistance: open ₹580, close ₹615. The next day, price barely moves: open ₹600, close ₹595 — a small red candle entirely inside the prior body. Bearish Harami confirmed. Entry: short at ₹595 or next open. Stop: above ₹616 (prior candle close). Target: ₹570 (prior support). The tiny range of the second day signals that buying pressure has completely dried up at this level.
The Harami Requires Confirmation
The Harami is a warning sign, not an immediate trade trigger. A third candle confirming the direction (breaking in the reversal direction) significantly improves reliability. Without confirmation, a Harami can simply be a pause before trend continuation — especially in strong trending markets.
Key Takeaways
- A Harami is a two-candle pattern where the second candle's body is entirely contained within the first candle's body.
- Bullish Harami: large bearish candle followed by a small bullish candle inside it — potential bottom.
- Bearish Harami: large bullish candle followed by a small bearish candle inside it — potential top.
- The small second candle shows that the prior trend's momentum has collapsed — the big move is over, for now.
- A Harami Cross (second candle is a Doji) is an even stronger signal of indecision and potential reversal.