1) First Confirmation
The stock opened strong but closed below the close of the Harami and formed a doji (a candle with small body) that told us that the market is looking for direction. This situation continued on the next two trading days with the formation of two other doji's on Feb 09 and on Feb 10 that closed not only above the previous doji but also above the harami pattern.
2) Series of Candlestick Japanese Doji's
The bull managed in two indecisive sessions to bring the price of INTC above the Harami and therefore confirmed the start of an uptrend. Because of the doji, it's a weak confirmation. A Prudent investor will wait for another confirmation on the trading day following the third doji to know whether or not the new trend is already started. However a series of doji's - indecisive days - in an oversold condition warns of the potential of a new trend to come.
3) Stochastics breakout in oversold condition
Because of the stochastics breakout from the bottom on the day the third doji formed, an aggressive trader could anticipate the beginning of a strong trend and decide to buy INTC after the information provided by the third doji. In this case to protect his position, he could place a stop loss at the low of the harami which acts now as a support.
4) Final Confirmation
On Feb 11,2010 after the stochastics breakout, the new uptrend of INTC price was confirmed with the formation of the long green candle that closed higher than both the Bullish Harami and the negated Bearish Continuation patterns.
5) Conclusion
From the preceding analysis, we have learned that when a Japanese Candlestick Bearish continuation pattern is "immediately" negated by a candlestick bullish reversal signal, the end of the previous trend is already reached or is near. A new trend direction should be expected, especially if the stochastics are in the oversold area.
