Bullish Harami

Sensex showing Bullish Harami

After going back to my textbooks --Steve Nison's Beyond Candlesticks, I have concluded that, the pattern of the last two days trading on the sensex , is a bullish harami, which is the candle charts version of an inside day of the bar charts.Though, in case of a Harami only the real body (range of open and close) of the second candle needs to be engulfed by body of the first candle.

As per Nison, the colours of the candles forming a Harami Pattern, can be white/white, white/black, black/white and black/black. (Please note, white is an upday and black is a down day). Their bullish or bearish nature depends on the preceding trend. Harami are considered potential bullish reversals after a decline and potential bearish reversals after an advance.No matter what the color of the first candlestick, the smaller the body of the second candlestick is, the more likely the reversal. If the small candlestick is a doji (doji is a candle with open and close almost the same), the chances of a reversal increase.

Because the first candlestick has a large body, it implies that the bullish reversal pattern would be stronger if this body were white. The long white candlestick shows a sudden and sustained resurgence of buying pressure. The small candlestick afterwards indicates consolidation. --courtesy stockcharts.com (I was too lazy to write it on my own) To come back to the sensex,

• the candle of 6th March (first day) was a long white candle ,
• with higher volumes than the candle of 9th March(second day).
• The second candle is completely engulfed by the first candle.
• we are in a downtrend from a long long time

So thursday's trade will confirm whether we are starting a rally which may sustain for sometime. Please let me know your views.

Lakshmi Ramachandran

vipreetsafetrading.com