Piercing line candlestick pattern: Bearish Piercing Candlestick Pattern: A Trader’s Guide


Because of what the pattern signifies about the underlying order flow shift in the market, we can use this piercing line trading in any market and we can also use it to trade on any timeframe. So, whether you prefer to trade on the higher timeframes or prefer to scalp on the lower timeframes, this setup is valid. So, the presence of this candlestick formation tells us that buyers were in control initially, driving price higher.


At the peak of the move, we see a bullish candle followed by a candle which gaps higher and then reverses to close below the mid-way point of the prior candle. And this serves as the piercing line candlestick confirmation for the bearish variety. Technical analysts and experts use other indicators as well to confirm a buying signal given by a Piercing line candlestick pattern. As a Piercing pattern indicates that bears lose control, as a result, a bullish movement is more likely. The bullish advancement on the second day also confirms that bulls have taken control of the market.

Latest Piercing Line Formations

Take time on your demo system to study various market reactions. Observe what happens at different times during the day as the market can be irrational, especially when one centre opens as another is closing. We chose stochastics in this example as it behaves well during a trend, but you may prefer another favourite. An engulfing pattern is a 2-bar reversal candlestick patternThe first candle is contained with the 2nd candleA bullish… The Piercing Pattern is viewed as a bullish candlestick reversal pattern, similar to the Bullish Engulfing Pattern. Piercing line is an essential trading tool that can be used to identify when a market is overbought or oversold.

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Still, you should only enter a trade once the candle following the second candle is completed and closes above the previous bullish candle. The Piercing Line is the opposite of the Dark Cloud pattern, which a bearish reversal pattern that appears after an uptrend warning of “rainy days” ahead. The candlestick pattern is likely namedpiercingbecause of the way the white candle’s close “pierces” through the midpoint of the previous black candle. The Piercing Line pattern consists of two candlesticks, that suggests a potential bullish reversal. The only difference is that the dark cloud cover happens during a bullish trend. Further, you can combine the trading pattern with technical indicators like the Relative Strength Index and the Stochastic Oscillator.

The technical storage or access that is used exclusively for anonymous statistical purposes. These are easy to obtain take profit levels and have a high degree of the market to trade towards the nearest resistance level. This short push lower, then trading higher in the same session gives validity to the buyers entering the market. This gives a sense of the price action moving down like you’d expect a gap to occur.

This pattern is valid since it assists traders in gaining a better understanding of whether the momentum of the market is bullish or bearish. If the market rallies after breaking through a previous low, this indicates that bullish momentum is likely present in the market. Another straightforward but critical factor to examine is the trade volume. If the volume on the second day is higher than usual, it is a stronger indicator that the downward trend is likely to end. This guide will teach you everything you need to know about the piercing line strategy, including how to identify and trade with this pattern. So whether you’re a beginner or an experienced trader, the piercing line can help you succeed in the markets.

Stop-loss level

The longer the two candles are, the more forceful the reversal. On the second candle, although the bears continue pushing the price down at the start of the session, the bulls jump in and fight back. If the bullish breakout happens, there is a possibility that the buy-stop trade will be initiated.

Its first candle should be a bearish red-colored candle which should be a part of a downtrend. This candle should be a non-doji candle – that is, it should have a suitable length. Other indicators are used by technical analysts and specialists to validate a purchasing signal offered by a Piercing line candlestick pattern. Because a Piercing pattern implies that the bears have lost power, a bullish trend is more likely.

A bearish abandoned baby is a type of candlestick pattern identified by traders to signal a reversal in the current uptrend. Candlestick patterns typically represent one whole day of price movement, so there will be approximately 20 trading days with 20 candlestick patterns within a month. They serve a purpose as they help analysts to predict future price movements in the market based on historical price patterns. The piercing line candle suggests that the bulls are gaining strength and are starting to push the price up. The pattern is considered more reliable if it occurs after a long downtrend and if the second candlestick has a long real body and a small upper shadow.

It is a https://forexbitcoin.info/ reversal pattern that signals a potential trend change from bearish to bullish. In our example, buyers not only filled the gap, but they also pushed the price beyond 50% of the body of the previous down candle, a sign of strength. Strength can be measured by how far above the 50% line the green candle closed. If it had closed above the red body, then we would have had a bullish engulfing pattern, another moderately high-probability prediction of an imminent reversal.

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The trader will then only enter after or near the end of the close of the third candlestick if it’s bullish. The size of the gap between the bearish and bullish candlesticks reflects the strength of the trend reversal. The location of a candlestick pattern on the chart matters a lot. Because some candlestick patterns will work in the trending market conditions while some will work during sideways market conditions.

Here, the market gaps lower on the opening and then retraces to close above the midpoint of the previous period’s red body. If the green body does not “pierce” this halfway point, more weakness can be expected in the market. When the price of an asset rises above a resistance region or below a support level, it is called a breakout. Breakouts signal the possibility of a price moving in the breakout direction. A breakout to the upside from a chart pattern, for example, might imply that the price will begin to move higher.

What is a bull market?

Bull market/up breakouts, on the other hand, perform better when the breakout is above the moving average. Expect no price turnaround if a piercing pattern appears when the dominant price trend is downward. Although price may break out upward, the factors driving price lower in the long run will likely to make the gain brief. Piercing Candlestick Pattern is a bullish reversal pattern that can be found at the end of a downtrend. Here I have explained a trading strategy based on supply zone and bearish piercing pattern.

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The piercing pattern, often known as the piercing line, is a two-stick design consisting of a long red candle and a long green candle. There is usually a large gap between the closing price of the first red candlestick and the opening of the green candlestick. The price has been pushed up to or above the previous day’s average price, indicating significant purchasing pressure. According to Bulkowski, this reversal predicts higher prices with an 64% accuracy rate. We can see that price is in an uptrend and is also testing a resistance point .

  • The Piercing Line is the opposite of the Dark Cloud pattern, which a bearish reversal pattern that appears after an uptrend warning of “rainy days” ahead.
  • The Harami pattern is a 2-bar reversal candlestick patternThe 2nd bar is contained within the 1st one Statistics to…
  • Understanding this saying is key to understanding the meaning behind the bullish piercing line pattern.
  • Keep in mind all these informations are for educational purposes only and are NOT financial advice.
  • HowToTrade.com helps traders of all levels learn how to trade the financial markets.

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However, it should not be relied upon solely in making trading decisions and should be combined with other analysis techniques for a more comprehensive and informed approach. If you are a trader, you have likely come across the piercing line pattern while analyzing charts. This candlestick pattern is known for its potential to signal a bullish reversal in a downtrend. However, before you start incorporating it into your trading strategy, it is important to backtest the piercing line candlestick pattern to determine its effectiveness. If the second candle closes above the first candle’s opening level, the piercing line pattern—a bullish reversal pattern—becomes a bullish engulfing pattern. When the real body of one candlestick completely engulfs the real body of the preceding candlestick, this is known as an engulfing pattern.

reversal candlestick

The name emerges from the appearance of its shape – among downward moving red candles, a suitably sized green-colored candle appears which appears to pierce the pattern, hence the name. Stop loss is located below the lowest level of the second bullish candle (if the price breaks this level, the pattern is invalidated, and you switch sides and enter a short-selling position). To help you with that, below we will show you two basic trading strategies to use when identifying the piercing line two-candlestick pattern. Second, the pattern tells them that a new bullish trend is about to start. However, it also tells traders that there could be a bearish continuation when there is a false breakout pattern.

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This candle formation is easy to spot and has a moderately high potential for signalling a reversal of a strong downtrend or a reversal for a brief pullback of an uptrend. Seasoned traders will react quickly to this alert, as can be seen from the resulting strong uptrend that followed it. In any event, learning to recognise key candlestick patterns is essential to becoming an effective forex trader. Lastly, if you are searching for a broker, we have prepared a list of the very best ones for your consideration. A ‘gap’ will now appear, and if it closes above the 50% line of and within the body of the red candle, then you have a worthy trading setup opportunity.