Let's talk about Harami — one of the most useful candlestick patterns in technical analysis. Harami is a Japanese word that literally translates as "pregnant," and when you see this pattern on a chart, you immediately understand why it was named that way. The shape is simply perfect: the second small candle appears to sit inside the body of the first large candle.

This pattern consists of two candles. The first is strong and long, indicating the strength of the current trend, whether it's upward or downward. The second candle is much smaller and completely fits within the range of the first. This indicates that the momentum is weakening and a reversal may occur.

There are two main variations. Bullish Harami appears at the end of a decline: first a red candle downward, then a small green candle upward. This hints at a possible rise. Bearish Harami is the opposite: a green candle upward, followed by a small red candle downward. This signals a potential decline.

I use this pattern as an early signal of a possible reversal. But here's an important point — you shouldn't rely solely on Harami. It's better to combine it with trading volume or RSI for confirmation. It works especially well when the pattern forms at support or resistance levels. The probability of a reversal is much higher there. This is truly one of my favorite patterns for finding entry points.