There are numerous Japanese candlestick patterns that have neutral implications. They do not signal a trend reversal but indicate a pause in the price movement. Spinning tops are one such neutral pattern.
The candlesticks, which have a small bodies with long upper and lower shadows, are called spinning tops. The colour of the body is not important in this pattern. These candlestick patterns occur on days of indecisiveness. Not much inference can be drawn from these patterns, except that the security is pausing or moving sideways. Spinning top candlestick patterns are shown in the Patni Computer Systems’ chart.
Though the term ‘harami’ might sound insulting to those who speak Hindi, its meaning is pretty innocuous. The word harami means pregnant in Japanese.
The harami patterns are a clue of a trend change at the end. This is a combination pattern of two candlesticks; one long candlestick followed by a small one that is within the body of the first. In bearish harami pattern, the first candle is white and the second is black, though the colour of the second candlestick is not important. The upper and lower shadows of the second candlestick do not have to be limited within the body of the first. However, it is preferable if the shadows are limited.
In bullish harami pattern, the first candle is black and the second white. This pattern occurs at the end of the downtrend. In sideways market consolidation, harami patterns do not have significance.
Refer the example below. The Reliance Industries stock, which was declining during September and October 2008, found support at around Rs 1,000 level. Triggered by bullish harami candlestick pattern, the stock temporarily reversed direction and rallied up the Rs 1,500 levels.