What is Harami Cross?
282 reads · Last updated: December 5, 2024
A harami cross is a Japanese candlestick pattern that consists of a large candlestick that moves in the direction of the trend, followed by a small doji candlestick. The doji is contained within the prior candlestick’s body. The harami cross pattern suggests that the previous trend may be about to reverse. The pattern can be either bullish or bearish. The bullish pattern signals a possible price reversal to the upside, while the bearish pattern signals a possible price reversal to the downside.
Definition
The Doji Engulfing is a Japanese candlestick pattern consisting of a large candlestick moving in the direction of the trend, followed by a small doji candlestick. The doji is completely contained within the body of the previous candlestick. This pattern indicates a potential reversal of the previous trend. It can be bullish or bearish. A bullish pattern suggests a possible upward price reversal, while a bearish pattern indicates a possible downward price reversal.
Origin
The Doji Engulfing pattern originates from Japanese candlestick charting techniques, first used by Japanese rice traders in the 18th century to analyze the rice market. This technique was later adopted by Western traders and is now widely used in technical analysis of financial markets worldwide.
Categories and Features
The Doji Engulfing pattern is categorized into bullish and bearish types. A bullish Doji Engulfing appears in a downtrend, indicating a potential upward price reversal. A bearish Doji Engulfing appears in an uptrend, indicating a potential downward price reversal. The main feature is that the body of the second candlestick is completely contained within the body of the first candlestick, forming an engulfing pattern.
Case Studies
Case Study 1: In 2020, Tesla's stock formed a bearish Doji Engulfing pattern after a period of uptrend. Subsequently, Tesla's stock price experienced a short-term pullback, confirming the reversal signal of the pattern. Case Study 2: In 2018, Apple's stock formed a bullish Doji Engulfing pattern during a downtrend. Afterward, Apple's stock price began to rebound, demonstrating the effectiveness of the pattern.
Common Issues
Common issues investors face when using the Doji Engulfing pattern include misjudging the timing of trend reversals and ignoring the impact of other market factors. To improve accuracy, it is recommended to combine this pattern with other technical indicators for analysis.
