Bearish Harami

Quick quiz: what is a "bearish harami?"

A) a famous anime character
B) a type of sushi involving "bear fish"
c) an experimental electronic band from Munich
d) a signal in technical trading

The answer is (D), though we could definitely go for some bear fish right now.

Technical analysis in financial trading involves looking at the trading pattern for an instrument (like a stock) and drawing conclusions about where it will likely go based on recent trends.

Okay, with that in mind, now to a brief primer on a particular kind of stock chart. There are several ways to present a trading chart. One of these ways is known as a "candlestick," wich represents each individual trading period (normally each day) as a vertical line and an overlayed box. It looks a little like a shish kebab held point up: the stick is the line and the chicken/steak/shrimp/veggies stand in for the box.

In the candlestick chart, the top of the line represents the highest price that was reached during the trading period. The bottom of the line represents the low. The box represents the distance traveled from the open of the market to the close. A green or white box means the stock (or whatever) closed higher, where the bottom of the box is the opening price and the top is the closing price. A red or black box means the stock closed lower, where the bottom of the box represents the close and the top represents the open.

All right, now to Bearish Harami. This is a particular pattern with a candlestick chart. It is marked by a "large candle" followed by a "short candle." Basically, the first day of trading saw the stock move a long distance. The second day saw a very short distance, with the entire length of the second day being within the bounds of the previous day (it had a lower peak and a higher low).

A Bearish Harami will have a gaining session (a green or white candle) as the first day and a losing session (a red or black candle) as the second day. This often suggests that stock that has been rising recently is ready to stall and maybe move back to the downside.

There's also a Bullish Harami, which has a losing session followed by a gaining session. This potentially signals the stock has completed a downtrend and is ready to stabilize.