Candlestick Charting For Dummies® by Russell Rhoads

Author:Russell Rhoads
Language: eng
Format: epub
Publisher: Wiley

Because the doji indicates that indecision ruled the day, I actually prefer the bearish harami cross to the plain old harami reversal pattern. Dojis are rare, and the occurrence of a bearish harami cross pattern is more of an event than the appearance of the bearish harami.

Trading on the bearish harami cross

The chart in Figure 8-8 gives you an idea of how the bearish harami cross can spell market success for you. This figure shows the pattern appearing on a chart of one of my favorite commodity contracts: frozen concentrated orange juice, or OJ.

In the movie Trading Places (one of my favorites), commodities are being explained to ersatz trader Eddie Murphy. There’s a table that displays several traded commodities (including orange juice), and when the conniving old Dukes brothers get to the OJ, one of them says, “orange juice, like you may have had for breakfast this morning” in a tone he could’ve used to explain the concept to a first grader. The look Eddie Murphy gives the camera is priceless.

Anyway, Figure 8-8 shows the bearish harami cross appearing in a choppy uptrend. The setup day is clearly an up day, and the contract reaches new highs. The cross or doji day follows, and the bulls are clearly running out of steam. After that, you see a very bearish day with no violation of the high for the setup day, which is what I like to use as the failure level for this pattern, and then a downtrend that lasts a few weeks. If you put on a short position and ride the downtrend for a while, you end up with an attractive profit.

For a failing bearish harami cross, I use Transocean Offshore (RIG). This company builds drilling rigs for use in deep water. The stock is a great trading vehicle due to the company’s exposure to the energy markets.

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