The End of a Trend
Before you can understand the usefulness of the harami cross, you have to have a firm understanding of the basic candlestick charts, and how to interpret their data for your own use. First of all, the candlestick is a type of bar graph that uses its symbols and colors to communicate information about price only. The body of the candlestick can be white, black, blue or red, and the edges of the body indicate the day’s opening and closing prices. Over time, these can be observed to indicate trends in the market.
Those that are interested in learning how to spot the harami cross in their own stock charts should look for a large candlestick that is followed by a doji, which is a signal that a stock has opened and closed at almost the same price. The doji will be located inside the top and bottom of the previous candlestick’s body, indicating that the direction of the precious trend is about to change.
Once you are able to look at a candlestick chart and see the movement of prices up and down in your mind, it’s time to learn how to isolate some of the patterns and use them to help you predict the direction that a particular stock is going to move. The harami cross is a reversal signal, meaning that when you spot it, it’s indicating that the previous trend is about to come to an end. Now isn’t the time to get nostalgic though, examine your long term goals and determine if it’s time to sell or hold on to what you’ve got.