Seeing a bad example of the bullish harami

Like most other patterns, the bullish harami can go awry. Figure 7-6 is a chart of IBM. A bullish harami appears because IBM's stock has been trending down slowly. Some up days exist, but most are down days for a few weeks leading up to the harami pattern. Any bullish inklings from the harami don't last very long.

The failure level of a bullish harami can vary depending on your preference. I use the open of the signal day as my stop level, and I suggest you use the same level in your trading efforts. In Figure 7-6, this level holds up for less than a day, and although there's some sideways trading for a few days, the downtrend resumes in time.

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